PIMCO economist Paul McCulley belives if the 60/40 portfolio keeps working from here, it means the system itself may be broken, as the 40-year run of the 60/40 portfolio has been driven heavily by a disinflationary environment that has occurred concomitant with a shift in the economy from labor to capital, driving up the value of income streams and leading to compounded returns since 1980 of 11.7% on stocks, 7.4% on bonds, and 10.4% on a 60/40 portfolio… in a way that can’t sustain and continue compounding in its current direction.
If you want to look beyond the 60/40 portfolio, assume the 40 bonds' function is risk-buffering to stock volatility – there are arguably other ways to create ‘resilient’ (not-necessarily-bond-based) portfolios, from using a wider range of equity diversification itself (e.g., more sectors, more countries, more exposure to private equity and venture capital in addition to publicly traded stocks), to the growing number of ‘alternative’ investment options. And while historically many ‘alts’ were only offered in high-priced vehicles, the rise of alts in ETFs, along with a broader push towards alts in general, is beginning to bring down at least some of the costs.