Gina Bolvin thinks the 60/40 portfolio will make a comeback in 2023. But the Bolvin Wealth Management Group president has some specific tips for investors considering the strategy after a down year. The strategy involves placing 60% of investments in stocks and the other 40% in bonds. The portfolio was down about 20% in 2022 , according to Morningstar , as both equity and fixed-income markets took a beating. Now, some are cautioning against the strategy as questions swirl around the potential for a recession and what the investing landscape will look like in 2023. Bolvin, with 25 years experience in financial planning, disagrees, saying the bond market should become more stable — and, in her words, “boring again” — as the Federal Reserve changes course on interest rate hikes. That will help the 60/40 portfolio once again perform an effective investing strategy, she said. She noted bonds tend to perform particularly well after the central bank stops raising rates. And 2023, she said, could be the year that bonds again become a “classic diversifier.” “I’m fascinated that after one horrible year, I’ve seen advisors are saying the 60/40 portfolio is dead. It’s very uncommon for bonds to be down double digits,” she said. “The 60/40 portfolio has a good long term track record, so one year isn’t a trend.” How to play the 60% Within the equity portion of a portfolio, Bolvin recommends a slight tilt towards value stocks, and further favors industrials, particularly aerospace and defense stocks thanks to an uptrend in defense spending, several stock buybacks and solid dividends in the sector. Bolvin said capital spending has been “resilient” even as parts of the broader economy have struggled. Bolvin also highlighted benefits stemming from “reshoring” and its impact on semiconductor stocks as companies move production out of China. The Syracuse grad also recommended financial stocks, particularly big banks and brokerage firms, noting how strong balance sheets following the 2008 financial crisis have better prepared the group to withstand a recession. She also touted the attraction of the asset management business, and said a divided Capitol Hill makes stringent financial regulation less likely. The final industry Bolvin highlighted is energy, the only group in the S & P 500 that rallied last year. She said tight global supplies will keep the stocks buoyant, while China’s economic reopening presents additional upside. Bolvin said tech could rebound when the Fed nears the end of its campaign to raise interest rates. While she doesn’t advise going all in on the sector until investors have more clarity on the path of inflation and future central bank moves, she said investors should have some exposure given that it is far and away the largest piece of the S & P 500. Within the group, Bolvin said cybersecurity stocks may be a good play as companies “won’t skimp on security.” How to play the 40% On the other side, Bolvin is less picky about bonds. “Within the fixed income markets, we think there aren’t a lot of wrong answers frankly,” she said. Investors with a timeline of three and five years or longer should look at corporate bonds with short maturity and high quality features, Bolvin said. She also said high-yield and preferred securities look healthy across the same timespan. Investors concerned about a recession, she said, should look at short-term Treasury and corporate bonds between one and three years. Bolvin’s firm manages approximately $380 million in assets.
