The '60/40 portfolio' failed in 2022... Doc Eifrig saw it coming... It's always darkest before the dawn... One Wall Street firm is in the right ballpark... A better way to invest...
 The '60/40 portfolio' failed this year...
Conventional wisdom was wrong... We are among the few to warn – last year – that both stocks and bonds would be in trouble in 2022. It boiled down to a simple yet largely unconsidered hypothesis... Stocks were more expensive, relative to businesses' real earnings, than they'd almost ever been. At the same time, inflation was at 40-year highs. Given that, the two major asset classes that comprised the conventional 60/40 long-term portfolio could go only one way... Down. Higher interest rates, telegraphed by the Federal Reserve, would lower values for bonds (which travel inversely to yields). That would break a multidecade trend... at the same time that decelerating economic-growth expectations would lead to lower stock prices. If you need the receipts for this prediction, just read this June 23, 2021 Digest from Stansberry Research partner Dr. David "Doc" Eifrig. Here's what he said about bond prices... Today, interest rates are so low, they can't really go lower. So bond prices can't rise, putting a mathematical end to a 40-year bond bull market that started in 1981 when interest rates peaked. What's more, the Fed's primary weapon to fight inflation is to raise interest rates, again meaning bond prices would go lower... The central bank has already indicated it will do just that as soon as next year. And here was the story with overpriced stocks as a speculative frenzy was raging. As Stansberry Research analyst Jeff Havenstein, who works on Doc's team, wrote in the June 21, 2021 Digest... On average, [stocks] trade for 32 times earnings. Historically, they've traded for about 17 times earnings. In other words, stocks in general currently cost about double their long-term average. Based on history... we should expect low – or even negative – annualized returns over the next decade. Put these two ideas together and here's what Doc said about the traditional 60/40 portfolio. Again, from the June 23, 2021 Digest... Many people simply expect that the 60/40 portfolio will keep making a "safe" 7% or 8% annual return in the years ahead... But that's based entirely on the faulty premise that the returns of the past 30 years will continue in the future. Faulty premise, indeed. This is why Doc devised an alternative portfolio-allocation strategy in his Income Intelligence newsletter (which considers additional assets like gold and real estate) to navigate these changing tides of conventional wisdom. It played out as Doc envisioned – quick... With one month to go, the 60/40 stock-bond portfolio – a staple of millions of folks' retirement plans – is sitting on one of its worst years in history. The good news is that the worst may be over. The bad news, on the surface, is that many folks, scarred from one of the worst years for investing ever, are now hesitant to get back into the markets. This is natural human behavior... But as is often the case with our primal inclinations in a modern world, "staying out" of the markets entirely is precisely the wrong idea to have right now. On the contrary, the position the markets are in today might offer a great opportunity. Today, I (Corey McLaughlin) will explain why... Let's start here... As Doc said in his "retirement wake-up call" last year, many professional money managers had just come to expect that the 60/40 portfolio would do what it has done the past several decades... provide an opportunity for moderate returns by taking moderate risk. The idea, frankly, had worked. Stocks gave an opportunity for higher returns while more conservative bond holdings balanced things out. But just because something has worked in the past doesn't mean it's guaranteed to in the future... As of one week ago, a 60/40 portfolio invested in the benchmark S&P 500 Index and the benchmark U.S. 10-year Treasury bond has an inflation-adjusted loss of 23.5% in 2022. As Stansberry NewsWire analyst Kevin Sanford wrote in our free news service last week... Only 1974 – another year plagued by high inflation – recorded a worse loss. A 60/40 portfolio saw a real loss of 24.11% that year. A 60/40 portfolio of U.S. stocks and bonds has only finished the year down more than 15% just five times in the past 94 years through year-end 2021. And it appears this year will be the sixth time in 95 years... In addition to 1974, the other years where a 60/40 portfolio had an annualized real loss greater than 15% were 1937 (22.8%), 1931 (19.9%), 1946 (18.6%), and 1941 (16.8%). That's not great company to keep... and we've written before about the present-day similarities to 1937, back when the country was trying to recover from the Great Depression and economic stimulus was ending. That's the bad news. Hopefully, you heeded our warnings and have been spared the worst of the market's losses this year. Now, here's the good news... It's always darkest before the dawn... Such a historically bad performance for stocks and bonds has typically led to better results for investors in the following years. The table below shows the returns of the S&P 500 three, six, 12, and 24 months after each of the above-mentioned years... As Kevin wrote in the NewsWire... The most notable is that within two years, the market succeeded with an average annual return of 36.4%. And within only one year, the market had an 80% success rate with an annual return of 15.6% – nearly double the average yearly return of the S&P 500. We can get into a bunch of reasons why this is, but the broad idea is that news tends to get "less bad" after fear is at high levels. Today, with a recession widely expected in 2023, fear is higher than usual. This is all to say that as much as we've warned about the dangers of the 60/40 portfolio since last year, it's time to start thinking around the next corner... and about what comes next. One Wall Street firm is betting on a comeback... We're going to bring up a recent research report published by Wall Street firm J.P. Morgan Asset Management. (This is only to make a point, not necessarily because we agree with everything the firm is saying.) Recently, J.P. Morgan Asset Management published its 2023 outlook and essentially called for a 60/40 portfolio revival. John Bilton, the firm's head of global multi-asset strategy, said in the report... The turmoil of 2022 has brought asset return forecasts close to long-term equilibrium; the 60/40 can once again form the bedrock for portfolios... The firm is projecting the 60/40 stock-bond portfolio will return 7.2% annually over the next 10 to 15 years, up from an expectation of 4.3% annual returns just last year. (This also tells you about how these Wall Street prognostications can quickly change.) J.P. Morgan is also projecting inflation to fall back to 2.6% over the next two years. That would prompt the Fed and other central banks to lower interest rates, which would boost bond and stock prices. I'm not so sure inflation will go that low again anytime soon... But the reason I bring this report up is to say that pro investors don't expect the stock and bond rout of 2022 to last much longer... And that's a wise view to at least consider today given how bad things were for the markets this year. As Kevin said... The 60/40 portfolio strategy isn't "dead," and neither are your prospects of investment gains. Look, any diversified portfolio strategy is built for long-term gains. No allocation assortment is going to survive every short-term economic and market hurdle. The takeaway here is that investors have historically gained confidence following record market drawdowns. If inflation starts to fall and the Fed indicates a slowdown in rate hikes, uncertainty will start to fade, sparking a rally in bond markets. And with borrowing rates no longer rising at their current pace, investors will regain their risk appetite. That will serve as a major tailwind for stocks... But, even should all this happen, there will be winners and losers... We're not suggesting going "all in" on the 60/40 portfolio and calling it a day. First of all, depending on the path of inflation, bonds might face stiffer headwinds than Wall Street firms might be expecting or portraying as likely... in the form of high inflation, just not 40-year-high inflation. And as we've been saying lately, certain sectors have been outperforming the broader markets in the past several months. It's perhaps a sneak peek that the leaders of the next bull run might not match the leaders of the past decade. In other words, even when conditions are favorable for a conventional 60/40 portfolio, it's possible to build a portfolio that performs better still – if you know where to look. Here's what I mean... What if I told you there was a major S&P 500 Index sector that famously beat inflation over time? And what if I told you this same sector protected folks' portfolios in every market crash of the past 30 years, outperforming the broad S&P 500 and tech-heavy Nasdaq Composite Index? And what if I told you one of our longest-tenured editors – who helped build this business into what it is today – says the opportunity to invest in this sector is bigger than usual right now? Hopefully you'd be interested. I'm talking again about Doc. He has a brand-new video out on an exciting opportunity in an industry that touches the lives of every American... and without exaggeration, everyone on the planet. He's calling this a "retirement shock." If you heeded Doc's advice last year about the threats for stocks and bonds, you'll want to hear what he's saying now about how to prepare for the market's next turn... and the batch of stocks you'll want to buy before the year ends to ensure you'll enjoy the biggest gains. Do not miss Doc's message. In the video, he explains why this is the biggest opportunity he has seen in 15 years with our company (and four decades in the markets). Click here to get all the details right now... plus, for a limited time, a special bonus from Doc. | | | | Win... By Not Losing This week on the Stansberry Investor Hour podcast, Dan Ferris and I talk about erupting volcanoes and currencies... and Dan interviews James St. Aubin, the chief investment officer for Sierra Mutual Funds and Ocean Park Asset Management. Click here to listen to this episode right now. And to catch all of the videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime. | | | | |
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New 52-week highs (as of 11/28/22): SPDR Bloomberg 1-3 Month T-Bill Fund (BIL) and iShares 0-3 Month Treasury Bond Fund (SGOV). In today's mailbag, praise for Ten Stock Trader editor Greg Diamond... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "I just wanted to give a big shout-out to Greg Diamond and his Ten Stock Trader. I have been a subscriber since January and have had a very good year by following his advice. "I have placed 24 trades that he recommended; 4 trades were losers and 20 were winners. Overall, I have a gain of approximately 31 percent. And all of this in a hellish bear market this year. "Greg really knows what he is doing!" – Paid-up subscriber Tommy H. All the best, Corey McLaughlin
Baltimore, Maryland
November 29, 2022
Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios | Stock | Buy Date | Return | Publication | Analyst | ADP
Automatic Data | 10/09/08 | 907.6% | Extreme Value | Ferris | MSFT
Microsoft | 11/11/10 | 866.7% | Retirement Millionaire | Doc | MSFT
Microsoft | 02/10/12 | 743.7% | Stansberry's Investment Advisory | Porter | HSY
Hershey | 12/07/07 | 557.1% | Stansberry's Investment Advisory | Porter | BRK.B
Berkshire Hathaway | 04/01/09 | 455.4% | Retirement Millionaire | Doc | AFG
American Financial | 10/12/12 | 450.5% | Stansberry's Investment Advisory | Porter | ETH/USD
Ethereum | 02/21/20 | 436.7% | Stansberry Innovations Report | Wade | WRB
W.R. Berkley | 03/16/12 | 423.3% | Stansberry's Investment Advisory | Porter | FSMEX
Fidelity Sel Med | 09/03/08 | 300.6% | Retirement Millionaire | Doc | ALS-T
Altius Minerals | 02/16/09 | 299.1% | Extreme Value | Ferris | Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.
| Top 10 Totals | | 4 | Stansberry's Investment Advisory | Porter | | 3 | Retirement Millionaire | Doc | | 2 | Extreme Value | Ferris | | 1 | Stansberry Innovations Report | Wade |
Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio | Stock | Buy Date | Return | Publication | Analyst | ONE-USD
Harmony | 12/16/19 | 1,090.9% | Crypto Capital | Wade | POLY/USD
Polymath | 05/19/20 | 1,069.1% | Crypto Capital | Wade | ETH/USD
Ethereum | 12/07/18 | 1,066.5% | Crypto Capital | Wade | MATIC/USD
Polygon | 02/25/21 | 842.6% | Crypto Capital | Wade | TONE/USD
TE-FOOD | 12/17/19 | 398.2% | Crypto Capital | Wade | Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.
Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios | Investment | Symbol | Duration | Gain | Publication | Analyst | | Nvidia^* | NVDA | 5.96 years | 1,466% | Venture Tech. | Lashmet | | Band Protocol crypto | | 0.32 years | 1,169% | Crypto Capital | Wade | | Terra crypto | | 0.41 years | 1,164% | Crypto Capital | Wade | | Inovio Pharma.^ | INO | 1.01 years | 1,139% | Venture Tech. | Lashmet | | Seabridge Gold^ | SA | 4.20 years | 995% | Sjug Conf. | Sjuggerud | | Frontier crypto | | 0.08 years | 978% | Crypto Capital | Wade | | Binance Coin crypto | | 1.78 years | 963% | Crypto Capital | Wade | | Nvidia^* | NVDA | 4.12 years | 777% | Venture Tech. | Lashmet | | Intellia Therapeutics | NTLA | 1.95 years | 775% | Amer. Moonshots | Root | | Rite Aid 8.5% bond | | 4.97 years | 773% | True Income | Williams | ^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. | 
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