Nouriel Roubini's Vision for a New Safe Haven Asset
Odd Lots
00:00
60/40 Portfolio Failure
- Traditional 60/40 portfolios rely on a negative correlation between stocks and bonds, with bonds acting as a safe haven.
- This correlation breaks down when inflation rises, as both stock and bond prices can fall simultaneously.
- The assumption of low, stable inflation underpins the 60/40 portfolio's effectiveness.
- If inflation rises and bond yields increase, long-duration treasuries, typically a defensive asset, become a source of loss.
- This necessitates a search for alternative assets that can hedge against inflation and other systemic risks.
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