• A powerful combination of macro factors has come together to push stocks and bonds toward strong YTD total returns.
  • Stocks have risen more than 28% YTD, boosted by easy monetary policy combined with still-significant, though slowing, corporate stock buyback activity.1 Meanwhile, bonds have returned more than 8%, benefiting primarily from a peak-to-trough interest rate decline of approximately 120 bps.1
  • Against this backdrop, the traditional 60/40 portfolio – based on a 60% allocation to equities (growth) and 40% to traditional bonds (income) – has seen a 20% YTD return, stronger than any full calendar year since 2000.2
  • While 2019 has been a banner year for the 60/40, it could be a tough act to follow. Bond prices are unlikely to benefit from further interest rate declines next year as significant as this year’s. Furthermore, stocks could be hampered by a more challenging earnings picture going forward as the past three quarters have already seen annualized earnings declines.
  • Investors may be well served by preparing for heightened volatility and a more challenging return environment across traditional asset classes in 2020. Volatility could be fueled by uncertainty surrounding the upcoming presidential elections, a deeper corporate earnings slump coupled with high equity valuations, or any number of yet-unknown geopolitical risks.

1 S&P 500 and Bloomberg Barclays U.S. Aggregate Bond Index, as of December 12, 2019.
2 Bloomberg Finance, L.P., as of December 12, 2019


This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice, and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. FS Investments cannot be held responsible for any direct or incidental loss incurred as a result of any investor’s or other persons reliance on the opinions expressed herein. Investors should consult their tax and financial advisors for additional information concerning their specific situation.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.