For decades, the 60/40 portfolio was the closest thing investing had to a universal answer: put 60% in stocks, 40% in bonds, rebalance once a year, and sleep well. Bank of America says that playbook is now losing to a four-asset alternative by the widest margin in roughly 90 years.
In a recent edition of the firm’s closely watched Flow Show research note, BofA chief investment strategist Michael Hartnett highlighted data showing that a blend of stocks, bonds, commodities, and gold has outpaced the classic 60/40 split by a gap not seen since the 1930s. The finding draws on long-run return series from Finaeon (formerly Global Financial Data), a provider of multi-century financial data used widely in academic research.
Why the gap has blown open
The 60/40 model rests on a simple premise: when stocks fall, bonds usually rise, cushioning the blow. That relationship held for most of the past four decades as inflation stayed low and interest rates drifted steadily downward. But the premise cracked in 2022, when the Federal Reserve’s aggressive rate hikes sent both stocks and bonds into the red simultaneously. It was the worst year for 60/40 portfolios since at least the 1930s, according to multiple Wall Street analyses at the time.
Since then, the conditions that broke the stock-bond hedge have not fully reversed. Inflation has cooled from its 2022 peak but remains sticky in services and shelter. The Fed held rates at elevated levels through much of 2024 and into early 2025, and tariff-driven price pressures have added fresh uncertainty about the path forward. In that environment, commodities and gold have thrived. Gold surged past $3,300 an ounce in spring 2025, fueled by central bank purchases and investor demand for inflation protection. Broad commodity indexes have also benefited from supply constraints and geopolitical risk.
Adding those two asset classes to a portfolio introduces return streams that have historically moved differently from stocks and bonds during inflationary periods. Academic research, including work by economists John Campbell, Adi Sunderam, and Luis Viceira, has documented that stocks and bonds tend to fall together when inflation is elevated, undermining the diversification that 60/40 portfolios depend on. That is the core of Hartnett’s argument: when inflation disrupts the traditional diversification benefit of 60/40, real assets pick up the slack.
What the data actually shows, and where it gets murky
The Finaeon dataset is one of the few sources that can support a comparison stretching back to the Great Depression. Stanford’s library system catalogs it as a resource available for long-run market analysis, and it is used in academic research on asset allocation and financial history. That gives the “since the 1930s” framing a credible statistical foundation, though a library catalog entry confirms the dataset’s existence and scope rather than vouching for the accuracy of every underlying series.
But several key details remain unclear. BofA has not publicly disclosed the exact weightings of the four-asset mix, whether it assumes equal 25% slices or tilts toward one component. The rebalancing frequency, the benchmark used for commodities, and whether returns are measured in nominal or inflation-adjusted terms all matter enormously. Small changes in any of those assumptions can shrink or widen a reported performance gap by several percentage points over a multi-decade horizon.
There are also data-quality questions inherent in any analysis that reaches back nine decades. Commodity price indexes from the 1930s and 1940s often rely on reconstructed series that may not reflect what a real investor could have bought and held. Gold ownership was restricted in the United States from 1933 to 1974, which complicates any backtest that assumes continuous gold exposure during that period.
Hartnett’s research, like all sell-side strategy notes, serves a commercial purpose alongside its analytical one. BofA’s global wealth and investment management arm oversees trillions in client assets, and a call to diversify beyond 60/40 naturally aligns with the firm’s product offerings. That does not make the analysis wrong, but it is worth keeping in mind when evaluating the headline claim.
Not everyone is convinced
Some portfolio strategists remain skeptical of the four-asset thesis. Critics note that the outperformance of commodities and gold is heavily concentrated in inflationary episodes, which historically have been the exception rather than the rule. If inflation returns to the low, stable levels that prevailed from the mid-1990s through 2020, the added complexity and cost of a four-asset portfolio could drag on returns rather than boost them.
Others point out that backtests spanning nine decades are inherently fragile. The investable universe in the 1930s bore little resemblance to today’s markets, and the transaction costs, tax regimes, and available instruments were radically different. A performance gap measured across such disparate eras may tell us more about the quirks of historical data than about what investors should do now. Vanguard’s research team, for example, has repeatedly argued that the 60/40 framework remains sound for most long-term investors, provided they maintain realistic return expectations and rebalance consistently.
What it means for your portfolio
For individual investors, the practical question is straightforward: does your current allocation have any exposure to commodities or gold? Many target-date retirement funds and robo-advisor portfolios still default to some version of 60/40, with little or no allocation to real assets. If that describes your holdings, the BofA research suggests you may be missing a meaningful source of diversification, particularly if inflation stays above the Fed’s 2% target or resurges.
Adding exposure does not require exotic instruments. Low-cost exchange-traded funds now cover broad commodity baskets (such as the Bloomberg Commodity Index) and gold (through physically backed ETFs) without requiring futures accounts or vault storage. A modest allocation of 5% to 15% across both asset classes, funded by trimming stock and bond positions proportionally, is a common starting point recommended by financial planners who favor real-asset diversification.
That said, commodities come with their own costs and complications. Futures-based commodity ETFs can suffer from “roll yield” drag when replacing expiring contracts, and commodity prices are notoriously volatile over short periods. Gold generates no income, which makes it a drag on total return during periods when stocks and bonds are both performing well. Investors who shift too aggressively toward a four-asset model based on a single backtest risk swapping one set of risks for another.
A historical pattern, not a reason to tear up the plan
The strongest reading of BofA’s finding is structural, not predictive. Periods of elevated inflation and interest-rate volatility have historically rewarded portfolios that include real assets alongside stocks and bonds. The current environment, with its mix of sticky prices, geopolitical friction, and central bank uncertainty, fits that pattern. The weakest reading would be to treat the headline number as a precise forecast of future returns.
If the Fed eventually succeeds in anchoring inflation back near 2% and bond yields stabilize, the classic 60/40 relationship could reassert itself. The stock-bond correlation that broke in 2022 is not permanently broken; it is regime-dependent. Investors who remember the 2010s, when 60/40 delivered steady returns with low volatility, know how quickly the consensus can shift back.
The most defensible move, based on the available evidence as of May 2025, is not to abandon 60/40 but to evolve it. Treating commodities and gold as permanent, modest portfolio components rather than tactical trades acknowledges the lesson of the past few years without overreacting to a single data point. Hartnett’s research is a useful prompt to stress-test your assumptions. It is not a reason to tear up the plan.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
