Morgan Stanley’s Chief Investment Officer, Mike Wilson, proposes a shift from the traditional 60\/40 portfolio to a 60\/20\/20 allocation. This strategy includes 20% in equities, 20% in bonds, and 20% in gold, aiming to enhance inflation protection.<\/p>\n
Wilson suggests that this new approach accommodates limited growth potential in U.S. stocks compared to Treasuries. It also addresses the demand for higher long-term bond yields. He sees gold as a resilient hedge that works alongside high-quality equities.<\/p>\n
The traditional 60\/40 model relies on stocks and bonds balancing each other, while gold introduces a new defensive element. Wilson prefers shorter-term Treasuries, specifically five-year notes, for capturing better rolling returns.<\/p>\n
According to Wilson, both gold and equities serve as hedges: equities provide growth potential, and gold acts as a haven when real interest rates decrease. His perspective emerges as U.S. equities recover; the S&P 500 and Nasdaq reach new highs despite September’s weaker historical trends, influenced by Trump\u2019s tariffs announcement on April 2.<\/p>\n
With the S&P 500 and Nasdaq pushing fresh highs, we should look at strategies reflecting limited upside from here. We can use derivatives to sell out-of-the-money call options against current holdings, generating income while the market possibly trades sideways. This is especially attractive as the VIX, a measure of market volatility, has fallen to 13.5, a low not seen since the fourth quarter of 2023, making option premiums appealing for sellers.<\/p>\n
We should now treat gold as the more effective hedge, especially with inflation concerns persisting. We’ve seen historically that gold has a strong inverse correlation to real interest rates; a 1% decline in real yields has often corresponded with a high single-digit percentage gain in gold. Therefore, buying call options on major gold ETFs provides leveraged exposure to any flight to safety or drop in real rates.<\/p>\n
The preference for shorter-term bonds means we should adjust our positions on the yield curve. A practical way to implement this is through Treasury futures, perhaps by favoring long positions in 5-year note futures over 10-year note futures. The spread between the 5-year and 10-year yield has recently narrowed to just 15 basis points, making a curve-steepening trade a compelling way to capture potential shifts in rate expectations.<\/p>\n
This cautious stance is reinforced by the calendar, as we are now in the middle of a historically weak month for stocks. Since 1950, September has been the worst-performing month for the S&P 500, with an average decline of roughly 1%. This seasonal headwind provides another reason to buy protective puts and build up hedges in assets like gold for the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Morgan Stanley’s Mike Wilson advocates a 60\/20\/20 portfolio, adding gold for inflation protection and diversification.<\/p>\n","protected":false},"author":62,"featured_media":16977,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-30890","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30890","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=30890"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/30890\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16977"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=30890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=30890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=30890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}