An Epic Historical Performance Streak: Domestic 60/40
US-centric 60/40 portfolios have knocked it out of the park since 2010. Nearly a 10 percent compound annual growth rate, less than a 7 percent worst drawdown, and a Sharpe ratio of 1.33 (see below).
This is a 6 -year performance run that the highest paid hedge fund managers in the world would drool over. Incredible.
The summary stats below run from 1/1/2010 to 12/31/2015. Results are gross of fees. All returns are total returns and include the reinvestment of distributions (e.g., dividends). Monthly rebalanced to 60/40 weights. 60% S&P 500 Total Return Index and 40% 10-year Treasury Bond Total Return index.
- 60/40 = 60% SP500 and 40% LTR
- SP500 = S&P 500 total return
- LTR = 10-year treasury total return
But let’s think about how this past performance might be currently influencing performance chasing fund flows…and of course, there is always the issue with long-term valuations…
As is always the case, who knows what the Market Gods will present, but the 5-10 year performance metrics for the domestic 60/40 buy-and-hold construct will be interesting out of sample.
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Definitions of common statistics used in our analysis are available here (towards the bottom)