The thesis
“The 60/40 portfolio is dead now that bonds don't hedge stocks anymore.”
How buffet read it
$10,000 split 60% S&P 500 and 40% US Aggregate Bonds, rebalanced annually.
2016–2026, covering the low-rate era, the 2022 rate shock, and beyond.
Dividends and coupons reinvested.
Benchmark: S&P 500 (100% stocks), to show the cost of holding bonds.
SPY 60%, AGG 40% · 2,679 trading days · benchmark SPY
$10,000 became
$0
The same money in the S&P 500 would have been $45,429 over 2016–2026 — the thesis came up short by $17,722.
The worst stretch
−20.9%, February 2020 to March 2020 — you would have sat through one month of that, and it took until July 2020 to get back to level.
the S&P 500 fell 33.7% at its worst over the same period. The thesis moved 10.9% a year against 17.8% for the index.
Where the thesis was wrong
The 60/40 portfolio trailed the S&P 500 by $17,722 over 2016–2026, returning +177.1% against the index's +354.3%. The bond allocation did cushion the 2020 crash — the thesis drew down −20.9% against the index's −33.7% — but 2022 broke the hedge: both legs fell together, producing −16.0% for the thesis versus −18.2% for pure stocks, a gap too narrow to justify the drag. The thesis earned that reduced volatility (10.9% annual versus 17.8%) across the full period, but the cost was real and compounding. Anyone holding this for the hedging benefit got less protection in the one year the thesis said bonds would fail, and less growth in every other year.
Counter-test
Same money, same schedule, parked in 1–3 month T-bills instead: $12,518.
Year by year
| Year | The thesis | SPY |
|---|---|---|
| 2016 | +9.1% | +13.6% |
| 2017 | +14.5% | +21.7% |
| 2018 | −2.7% | −4.6% |
| 2019 | +22.1% | +31.2% |
| 2020 | +14.0% | +18.4% |
| 2021 | +16.6% | +28.7% |
| 2022 | −16.0% | −18.2% |
| 2023 | +18.0% | +26.2% |
| 2024 | +15.5% | +24.9% |
| 2025 | +13.5% | +17.7% |
| 2026 | +8.0% | +13.4% |
What this verdict does not include
- US-listed stocks and ETFs only, priced on end-of-day closes.
- No tax, no trading fees, no slippage, no bid-ask spread.
- Dividends are reinvested, because closes are adjusted for them.
- Survivorship is not corrected for: only instruments that exist today are held.
- Only 11 years of history exist for this. Read it accordingly.
- The thesis is a qualitative claim about correlation, not a trading rule — this backtest shows the 60/40 return and drawdown history but cannot directly measure stock-bond correlation or declare the strategy 'dead'.
- To stress-test the hedging claim, compare the 2022 drawdown period: both SPY and AGG fell simultaneously, which is the core evidence behind the thesis.
- No alternative allocation was substituted; the classic 60/40 is tested as stated.
Keep this thesis
buffet re-runs it once a month and mails you the new number. Nothing else is ever sent.
Another thesis
Every verdict names something it could not test. That gap is usually the next thesis.
Run another thesis — $5