The classic 60/40 portfolio has lost fans. They're intrigued by 25/25/25/25.
It's no secret investors have been disappointed lately with the classic 60/40 investment strategy. Can the so-called 'permanent" portfolio provide an alternative? Recent returns look good, but there are risks.
The permanent portfolio is a nickname some investors give to a strategy of splitting your holdings equally among four major asset classes: stocks, bonds, gold, and cash. (It isn't to be confused with Permanent Portfolio mutual fund, but more on that later.)
The permanent portfolio, also sometimes referred to as the 25/25/25/25 strategy, has performed well in recent years, more or less matching the returns of the more traditional 60% stocks/40% bonds strategy. And some investors think the future looks bright.
'Commodities are in [an] early-stage structural bull market, led by gold, and U.S. stocks in [a] late-stage structural bear market relative to international stocks," wrote BofA Securities investment strategist Michael Hartnett in a note Thursday. 'The most diversified of portfolios, e.g. 25/25/25/25 cash/gold, stocks/bonds likely to remain competitive vs 60-40."
Hartnett goes on to outline potential headwinds for U.S. stocks, including more restrained U.S. government spending, tariffs, and declining productivity. Indeed, on Thursday, the Bureau of Labor Statistics noted that U.S. productivity declined for the first time in three years during the first quarter.
What's more, writes Hartnett, gold has tended to turn in its best performance relative to stocks in historical periods when markets have experienced similar dynamics, and the U.S. appeared to be on its back foot: in the 1930s following the Smoot-Hawley Tariff Act, during the stagflation of the 1970s, and following turmoil of 9/11.
Recent returns for the permanent portfolio strategy certainly look attractive. To gauge performance, Barron's asked Morningstar to calculate trailing returns for a portfolio split equally between the Vanguard Total World Stock ETF, iShares Core U.S. Aggregate Bond ETF, SPDR Gold Shares, and cash. We also asked for returns for a portfolio with 60% invested in the Vanguard stock fund and 40% in the iShares bond fund as a point of comparison.
Over the past year, the permanent portfolio was the winner hands down, returning nearly 17%, compared with 10% for the traditional 60/40 strategy. What was more surprising: The strategies were essentially neck-and-neck at the five- and 10-year marks. Only over the past 15 years has the classic 60/40 strategy prevailed, with an average annual return of 6.5%, compared with 5.2% for the permanent portfolio.
It's also worth taking a look at the returns of the popular Permanent Portfolio mutual fund, a $4.3 billion mutual fund run by longtime portfolio manager Michael Cuggino. Cuggino's take on the strategy involves investing roughly one-third in bonds, one-third in gold, and one-third in stocks that he favors, such as Palantir, Nvidia, and Costco Wholesale. The fund has returned 22% in the past year and 6.9% over the past 15 years. However, it's worth noting that its returns have historically been volatile, with the portfolio sometimes leading its fund category and sometimes lagging dramatically.
Can the strategy of ditching the classic 60/40 portfolio—while adding big helpings of cash and gold—continue to outperform in coming years?
It's true stock the market looks iffy. Despite a difficult start to 2025, U.S. stocks are still trading at about 35 times their long-term cyclically-adjusted earnings—about where they were in 1929—and higher than at any time since the dot-com bubble. Market watchers, including Goldman Sachs and Vanguard, have warned the U.S. stock market could be on the verge of a 'Lost Decade," of sluggish returns.
On the other hand, history shows few assets have matched stocks' long-term historical returns, and that is true of bonds, gold, and cash. It's worth noting that gold prices are also at historic highs, having jumped 40% in the past year. Investors who add a big slug of gold to their portfolios today are hardly getting in on the ground floor.
Write to Ian Salisbury at ian.salisbury@barrons.com
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
7 hours ago
- Economic Times
Trump's tariff chaos threatens his push for rust belt revival
US President Donald Trump's signature trade policy is threatening to backfire by upending other top priorities: the revival of US manufacturing and the American Rust Belt. In Illinois, Trump's tariffs prompted a compressor maker to delay a key equipment purchase after an ambitious factory revamp. Rockwell Automation Inc., a Wisconsin-based producer of factory tools, says some manufacturers are putting projects on hold because of uncertainty over costs and future demand. Snap-on Inc. is seeing similar hesitancy among car mechanics. The warnings underscore the rising worry that turbulence from Trump's trade wars will smother the progress US manufacturers have already made revving up American factories. Manufacturing payrolls fell by 8,000 last month, the most this year, according to the Bureau of Labor Statistics. US and Chinese negotiators will resume trade talks Monday in London, as the world's two largest economies look to resolve disputes over tariffs and the US, perhaps nowhere is the anxiety higher than in the Midwest, which is still home to the nation's highest concentration of manufacturing employment even after bleeding jobs early this century from the rise of offshoring. 'Overall, it is going to be a drag on the US economy,' said Gus Faucher, chief economist for PNC Financial Services Group in Pittsburgh, calling the tariffs a tax that will raise prices. 'In particular, it's going to be a drag on the Midwestern economy.' On-again, off-again levies on imported components and machinery — as well as retaliatory duties imposed by other countries — have injected volatility into supply chains, raised costs, hurt exports and chilled investment. US factory activity contracted for a third straight month in May, and every comment in the Institute for Supply Management's sample of survey responses from manufacturing executives focused on tariffs — including a respondent in the electric equipment, appliance and components business who said the duties have created supply-chain disruptions rivaling those of the pandemic. The Midwestern states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin lost almost 2 million manufacturing jobs between 1998 and 2010 as trade deals and China's entrance into the World Trade Organization spurred companies to seek lower-cost labor and production outside the recent years, though, a cautious optimism had returned. As supply chain shocks from the pandemic pushed companies to bring operations back home, and as Washington offered sweeping incentives for clean energy, EVs and semiconductor production, the Midwest began to stir. Since the start of 2021, the region has added over 100,000 factory jobs, according to federal data. Rust Belt states had outsized investment in factories in the past decade, according to a report by Citi Institute, even as southern states that offer right-to-work laws, lower labor costs, and aggressive incentive packages to lure global manufacturers have also seen a boom. The White House has pointed to the announcements of big planned investments in the US by companies and foreign governments as proof the president's trade policies are working. Case in point: When Trump traveled to the Pittsburgh area late last month to champion a deal between United States Steel Corp. and Nippon Steel Corp., he touted his plans to increase import duties on steel and aluminum to 50% from 25%. Still, growth in overall US private construction spending on manufacturing has flatlined from the boom seen under the Biden Trump's approach plays out in the long term remains to be seen. For now, however, the constant shifting of his tariff strategy has 'got people spooked,' said Andrew Anagnost, chief executive officer of Autodesk Inc., which sells software used by manufacturers to design factories and improve manufacturing processes.'The current operating mode is just the death to long-term investment,' Anagnost said. Construction work that was already underway or in the backlog is continuing but the uncertainty 'is stalling future projects.'Milwaukee-based Rockwell Automation has already seen some investments get delayed because of uncertainty about how tariffs will affect business. The uneasiness is particularly acute in the automotive industry, which is trying to rewire a global supply chain designed for the old economic order, and in other capital-intensive projects for the long term, CEO Blake Moret said. Snap-on, which provides tools used by automotive mechanics, can manage the impact of tariffs with minimal disruption because it mostly serves US customers with domestically made products, said CEO Nicholas Pinchuk. But while auto shops are still busy and profitable, they're 'confidence poor,' he said, adding that customers of the Kenosha, Wisconsin-based company are wary of economic disruption even if they support Trump politically. 'They're still big Trump fans. This is Trump territory,' he said. 'They believe in where we're going, but they're worried that something's going to happen.'Even manufacturers that are positioned to gain from tariffs are Mill, one of the last vertically integrated US textile mills in an industry devastated by offshoring, has been getting calls from from retailers looking for a domestic producer, said CEO Ross Widmoyer. But despite a projected fifth straight record sales year at the Minnesota-based maker of blankets, throws and apparel, Widmoyer said he's concerned about weakening economic growth. 'If there's a slowdown in consumer spending, it doesn't matter if you're making products domestically or overseas, and that's not good for anybody,' said Widmoyer, who is also chairman of the Minnesota Manufacturers' Decatur, Illinois, TCCI Manufacturing was completing a $45 million factory revamp just as Trump slapped steep new tariffs on countries around the world. With US duties on China zigzagging between 30% and 145% in just weeks, TCCI decided to shelve the purchase of crucial Chinese-made testing equipment it needs by early next year. The factory makes compressors used in company has evaluated alternative sources for the equipment, but 'the problem with that is we don't know what the tariffs are doing,' TCCI President Richard Demirjian said as the company opened the factory earlier this year. TCCI still has high hopes for the plant despite the uncertainty around tariffs and moves by congressional Republicans to roll back federal sweeteners for electric-vehicle purchases. The facility is now called the Clean Energy Innovation Hub, evoking the manufacturer's bet on the future. As a symbol of the region's past, Demirjian drove his father's maroon 1927 Model T to the plant's grand re-opening in April. Illinois Governor JB Pritzker spoke at the ribbon-cutting ceremony and touted the factory as the first to benefit from the state's Reimagining Energy and Vehicles program, which provided part of more than $21 million that TCCI received in state incentives for the project. But Pritzker, a Democrat widely seen as a potential presidential candidate in 2028, warned that erratic policy-making is undercutting efforts to bolster US manufacturing.'Tariffs are on, tariffs are off, tariffs are up, tariffs are down,' Pritzker said. 'Imagine trying to run a business and figure out from day to day how you're going to do pricing, who you're going to do business with, based upon where the tariffs are being imposed.'
Time of India
8 hours ago
- Time of India
Trump's tariff chaos threatens his push for rust belt revival
US President Donald Trump 's signature trade policy is threatening to backfire by upending other top priorities: the revival of US manufacturing and the American Rust Belt . In Illinois, Trump 's tariffs prompted a compressor maker to delay a key equipment purchase after an ambitious factory revamp. Rockwell Automation Inc., a Wisconsin-based producer of factory tools, says some manufacturers are putting projects on hold because of uncertainty over costs and future demand. Snap-on Inc. is seeing similar hesitancy among car mechanics. The warnings underscore the rising worry that turbulence from Trump's trade wars will smother the progress US manufacturers have already made revving up American factories. Manufacturing payrolls fell by 8,000 last month, the most this year, according to the Bureau of Labor Statistics. US and Chinese negotiators will resume trade talks Monday in London, as the world's two largest economies look to resolve disputes over tariffs and technology. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Ready-to-Move Flats in Chattarpur South Delhi A D Infra Get Info Undo In the US, perhaps nowhere is the anxiety higher than in the Midwest, which is still home to the nation's highest concentration of manufacturing employment even after bleeding jobs early this century from the rise of offshoring. 'Overall, it is going to be a drag on the US economy ,' said Gus Faucher, chief economist for PNC Financial Services Group in Pittsburgh, calling the tariffs a tax that will raise prices. 'In particular, it's going to be a drag on the Midwestern economy.' Live Events Bloomberg On-again, off-again levies on imported components and machinery — as well as retaliatory duties imposed by other countries — have injected volatility into supply chains, raised costs, hurt exports and chilled investment. US factory activity contracted for a third straight month in May, and every comment in the Institute for Supply Management's sample of survey responses from manufacturing executives focused on tariffs — including a respondent in the electric equipment, appliance and components business who said the duties have created supply-chain disruptions rivaling those of the pandemic. The Midwestern states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin lost almost 2 million manufacturing jobs between 1998 and 2010 as trade deals and China's entrance into the World Trade Organization spurred companies to seek lower-cost labor and production outside the US. In recent years, though, a cautious optimism had returned. As supply chain shocks from the pandemic pushed companies to bring operations back home, and as Washington offered sweeping incentives for clean energy, EVs and semiconductor production, the Midwest began to stir. Since the start of 2021, the region has added over 100,000 factory jobs, according to federal data. Rust Belt states had outsized investment in factories in the past decade, according to a report by Citi Institute, even as southern states that offer right-to-work laws, lower labor costs, and aggressive incentive packages to lure global manufacturers have also seen a boom. The White House has pointed to the announcements of big planned investments in the US by companies and foreign governments as proof the president's trade policies are working. Case in point: When Trump traveled to the Pittsburgh area late last month to champion a deal between United States Steel Corp. and Nippon Steel Corp., he touted his plans to increase import duties on steel and aluminum to 50% from 25%. Still, growth in overall US private construction spending on manufacturing has flatlined from the boom seen under the Biden administration. Bloomberg How Trump's approach plays out in the long term remains to be seen. For now, however, the constant shifting of his tariff strategy has 'got people spooked,' said Andrew Anagnost, chief executive officer of Autodesk Inc., which sells software used by manufacturers to design factories and improve manufacturing processes. 'The current operating mode is just the death to long-term investment,' Anagnost said. Construction work that was already underway or in the backlog is continuing but the uncertainty 'is stalling future projects.' Milwaukee-based Rockwell Automation has already seen some investments get delayed because of uncertainty about how tariffs will affect business. The uneasiness is particularly acute in the automotive industry, which is trying to rewire a global supply chain designed for the old economic order, and in other capital-intensive projects for the long term, CEO Blake Moret said. Snap-on, which provides tools used by automotive mechanics, can manage the impact of tariffs with minimal disruption because it mostly serves US customers with domestically made products, said CEO Nicholas Pinchuk. But while auto shops are still busy and profitable, they're 'confidence poor,' he said, adding that customers of the Kenosha, Wisconsin-based company are wary of economic disruption even if they support Trump politically. 'They're still big Trump fans. This is Trump territory,' he said. 'They believe in where we're going, but they're worried that something's going to happen.' Even manufacturers that are positioned to gain from tariffs are anxious. Faribault Mill, one of the last vertically integrated US textile mills in an industry devastated by offshoring, has been getting calls from from retailers looking for a domestic producer, said CEO Ross Widmoyer. But despite a projected fifth straight record sales year at the Minnesota-based maker of blankets, throws and apparel, Widmoyer said he's concerned about weakening economic growth. 'If there's a slowdown in consumer spending, it doesn't matter if you're making products domestically or overseas, and that's not good for anybody,' said Widmoyer, who is also chairman of the Minnesota Manufacturers' Council. In Decatur, Illinois, TCCI Manufacturing was completing a $45 million factory revamp just as Trump slapped steep new tariffs on countries around the world. With US duties on China zigzagging between 30% and 145% in just weeks, TCCI decided to shelve the purchase of crucial Chinese-made testing equipment it needs by early next year. The factory makes compressors used in EVs. The company has evaluated alternative sources for the equipment, but 'the problem with that is we don't know what the tariffs are doing,' TCCI President Richard Demirjian said as the company opened the factory earlier this year. TCCI still has high hopes for the plant despite the uncertainty around tariffs and moves by congressional Republicans to roll back federal sweeteners for electric-vehicle purchases. The facility is now called the Clean Energy Innovation Hub, evoking the manufacturer's bet on the future. As a symbol of the region's past, Demirjian drove his father's maroon 1927 Model T to the plant's grand re-opening in April. Illinois Governor JB Pritzker spoke at the ribbon-cutting ceremony and touted the factory as the first to benefit from the state's Reimagining Energy and Vehicles program, which provided part of more than $21 million that TCCI received in state incentives for the project. But Pritzker, a Democrat widely seen as a potential presidential candidate in 2028, warned that erratic policy-making is undercutting efforts to bolster US manufacturing. 'Tariffs are on, tariffs are off, tariffs are up, tariffs are down,' Pritzker said. 'Imagine trying to run a business and figure out from day to day how you're going to do pricing, who you're going to do business with, based upon where the tariffs are being imposed.'
Time of India
9 hours ago
- Time of India
Netflix, Spotify, Amazon, Apple and others to fight against Canada's Bill C-11 that they see as 'Streaming/Hidden Tax': What makes the court fight important
On Monday, June 9, 2025, tech and streaming giants Netflix, Spotify, Apple, and Amazon will appear before Canada's Federal Court of Appeal to challenge the Canadian Radio-television and Telecommunications Commission's (CRTC) regulations under the Online Streaming Act (Bill C-11). Tired of too many ads? go ad free now Passed in April 2023, the law mandates that streaming services earning over $25 million annually in Canada contribute 5% of their Canadian revenues to support Canadian content, including Indigenous, francophone, and local independent news programming. The CRTC estimates this will generate approximately $200 million annually to bolster Canada's cultural and media sectors. However, the legal showdown has ignited a broader debate about fairness, cultural identity, and the future of digital regulation. Spotify and others calls it Hidden Tax The challengers -- Apple, Amazon, Spotify, and the Motion Picture Association–Canada (representing Netflix, Disney, Paramount, and others) -- argue that the CRTC's rules overstep its authority under Canada's Broadcasting Act. Spotify has labeled the 5% contribution a 'hidden tax,' asserting it unfairly burdens foreign streaming platforms. Amazon contends that the regulations discriminate by imposing stricter requirements on international services compared to Canadian media companies, which face different obligations. Apple has called the levy 'premature and inequitable,' noting that streamers are required to contribute five times more than traditional radio broadcasters while being denied access to the very funds they support. The Motion Picture Association–Canada has taken particular issue with a 1.5% contribution to a local news fund, arguing that streaming platforms do not produce news, hold no news licenses, and cannot access the funds they are mandated to support. Tired of too many ads? go ad free now 'This is a policy mismatch,' said a spokesperson for the association. 'Streamers are being asked to subsidize a sector they don't operate in, without any reciprocal benefit.' Netflix, Spotify and others have created funding crisis, claims traditional Canadian media On the other side, the Canadian Association of Broadcasters (CAB) argues that traditional media outlets have long shouldered the responsibility of funding Canadian content while global streaming platforms have operated without similar obligations. The CAB warns that the rise of streaming services has exacerbated a funding crisis for local news and independent media, with many outlets struggling to survive in an increasingly digital landscape. The debate extends beyond the courtroom, touching on questions of cultural identity and economic fairness. However, critics warn of unintended consequences. Some analysts have cautioned that the 5% levy could lead to higher subscription costs for consumers or prompt streaming services to exit the Canadian market entirely. He pointed to Spotify's recent withdrawal from France after similar regulations were imposed as a potential precedent. What makes the court's decision important The Federal Court of Appeal is expected to deliver its ruling by late summer 2025. The decision could reshape the regulatory landscape for digital platforms in Canada, determining whether the CRTC's rules are upheld, modified, or struck down. A ruling in favor of the streamers could weaken the Online Streaming Act's framework, potentially jeopardling calls for legislative amendments. Conversely, upholding the CRTC's authority could embolden other countries to adopt similar measures, intensifying global tensions between tech giants and regulators.
