Jurrien Timmer, Director of Global Macro at Fidelity Investments, questions whether the classic 60/40 strategy will return to full working order. His analysis shows that the five-year correlation between stocks and bonds remains above zero at current US Treasury yield levels.
The 60/40 portfolio is traditionally built from 60% stocks and 40% bonds. This structure is designed for bonds to rise during stock market drawdowns. At first glance, the observed decline in correlation between the instruments looks positive for investors. However, Timmer emphasizes that high yields prevent these assets from moving in opposite directions. As a result, holders of 60/40 portfolios risk receiving a significantly lower level of protection.
The impact of yield levels on stock-bond correlation
Timmer's data demonstrates how synchronously the S&P 500 and long-term Treasury bonds have moved over a five-year period. In 2013 and 2020, when yields were minimal, the correlation dropped deep into negative territory. As yields rose, the indicator turned positive. The latest reading is in the 10–12% range as of November 2.
"The correlation between stocks and bonds is falling — does this mean the return of the 60/40 paradigm? I'm not so sure," the analyst notes.
At the same time, shorter 13-week measures declined or turned negative during the 1998 crisis linked to Long-Term Capital Management (LTCM). The same happened during the dot-com crash and the 2025 tariff "panic" — as Timmer calls that year's sell-off wave. Yet the five-year trend remained positive.
Bonds as protection only against growth threats
Recent data confirms this scenario. Treasury bonds rose in price during the October sell-off in AI-related technology stocks. The 10-year yield dropped below 5% on October 22 — the first time since September 22.
Ariel Investments Vice Chairman Charlie Bobrinskoy considers buying bonds justified when the 10-year Treasury yield approaches 5%. However, inflation remains the decisive factor. In a 2023 interview, Timmer noted that over the long term, it is inflation that determines whether bonds can protect a 60/40 portfolio.
As an alternative, Timmer proposes a 60/20/20 portfolio. In a Fidelity note from May 2025, he recommends supplementing the portfolio with alternative assets, gold, bitcoin (BTC), and cash — which would occupy the remaining 20% of the portfolio.
Cryptalist analysis: The shift of the stock-bond correlation into positive territory destroys the basic premise of the classic 60/40 — diversification through opposing asset dynamics. For institutional investors, this is a signal to revise the defensive portion of the portfolio in favor of gold, bitcoin, and alternative instruments, which confirms the gradual integration of digital assets into traditional allocation.