Insights

Author: Matt O'Mara, Partner, Co-Head Apollo Aligned Alternatives

A combination of elevated public stock and bond valuations, recalcitrant inflation, and higher-for-longer interest rates could be creating new challenges for 60/40 portfolios and an attractive entry point to private markets.

Key Takeaways

• Valuations in public markets remain at lofty levels. Persistent inflation could keep interest rates higher for longer.
• High valuations and an elevated rate environment, combined with other factors like strong correlations between stocks and bonds, could create challenges for investors with 60/40 portfolio allocations.
• Periods of high public equity valuations have historically represented attractive entry points to private markets. A balanced portfolio of alternatives has meaningfully outperformed following past periods of elevated public equity valuations and interest rates.
• Adding private markets to a 60/40 portfolio has historically enhanced returns while minimizing volatility, boosting returns per unit of risk across market cycle.

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