For decades the 60‑40 stock‑and‑bond allocation — 60% equities, 40% Treasury bonds — served as the universal portfolio standard, delivering growth while bonds offset equity risk. Since 2021, however, high inflation has eroded that diversification benefit. Correlation between the S&P 500 and 10‑year Treasuries has turned positive, so bonds now amplify equity losses instead of cushioning them, and bond returns have been negative across weightings.

The drivers of rising Treasury yields are hotly debated: inflation shock, stronger growth, fiscal excess, hyperscaler debt issuance, and questions about Federal Reserve credibility under Kevin Warsh. Arun Sai of Pictet Asset Management says he has never seen such divergent client views on what moves yields. Matt Rowe at Man Group argues the bond leg must be actively managed rather than left passive. A new framework distinguishes “crisis correlation” from “non‑crisis correlation,” suggesting long‑duration Treasuries may not protect in risk‑off episodes. The open question: adjust the 60‑40 ratio or rethink Treasury exposure altogether.