In a five-year outlook report, the firm touts a ‘generational reset higher in bond yields’
The prospect of bond yields remaining high for long should prompt a reversal of the typical 60/40 portfolio that holds 60% in stocks and 40% in bonds, U.S. bond giant asset manager PIMCO said on Tuesday.
The 60/40 strategy counts on stocks rising amid economic optimism and bonds strengthening during turbulent times. But the negative correlation between the two asset classes has weakened over the past few years. “A diversified bond allocation offers the potential for long-term equity-like returns with a more favorable risk-adjusted profile, especially given what may be stretched valuations in stock markets,” it said.
Banks’ retrenchment from the commercial real estate sector will also present opportunities for investors, it said.
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