In A Second Opinion on the 60/40 Default (Oct 2025), Ben Inker of GMO argues that investors relying on traditional stock/bond portfolios may face disappointing returns in today’s high-valuation environment.
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The 60/40 model has delivered strong long-term results, but history shows multiple “lost decades” when returns turned negative after valuation peaks.
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GMO warns today’s setup looks similar: expensive U.S. growth stocks and tight credit spreads point to low future real returns for passive 60/40 portfolios.
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A valuation-driven, dynamic allocation—focused on non-U.S. equities, deep value, Japan small caps and liquid alternatives—offers stronger risk-adjusted potential than sticking to market-cap weights.
Is it time to challenge the passive 60/40 mindset and look beyond U.S. large-cap growth? The full report breaks down GMO’s conviction themes and tactical positioning
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