One of the most popular allocations for model portfolios in recent history has been the 60/40 model. A classic allocation with 60% invested in stocks and 40% invested in bonds. Until recently, this model has generated stable returns for investors. However, this year’s brutal returns for both the equity and fixed income markets have investors wondering if the traditional 60/40 model provides adequate protection. In most previous equity downturns, investors have been able to count on bond instruments to hedge negative equity performance due to an inverse relationship between stock returns and bond yields. But this year, investors have been faced with both a down stock market and a hawkish Fed, leading to losses in both asset classes. This has made the 60/40 model seem outdated as of late. While the 60/40 model may not be dead yet, investors may want to consider model portfolios with additional asset classes in the current market environment.

Finsum:With a down stock market and a hawkish Fed, investors may want to reconsider the 60/40 model portfolio.

Based on comments made at the Fed's Jackson Hole conference, volatility is here to stay. Many of the economic policymakers who spoke at the conference believe we are entering into a highly volatile economic period. If the last few years, which have included inflation, supply chain disruptions, and back-and-forth growth, weren’t enough, we are likely to see more frequent and larger shocks in the years to come. Plus, the continued hawkish stance from Fed chair Jerome Powell means a reversal in Fed policy isn’t likely any time soon. This means more volatility in the market for the foreseeable future. Investors can no longer rely on central bank rate cuts to support markets during downturns. The Fed is now expected to raise interest rates another 75 basis points during its next policy meeting in September. According to CME Group data, approximately 75% of traders are now pricing a third consecutive increase of 75 basis points.

Finsum:Based on comments made at the Fed's Jackson Hole conference, investors can expect continued economic and market volatility for months and even years to come.

The American Council of Life Insurers (ACLI) has put its support behind a lawsuit challenging the Labor Department’s subsequent guidance on the fiduciary rule. The ACLI is the nation’s largest life insurance trade association. The group added an amicus brief to an ongoing lawsuit by the Federation of Americans for Consumer Choices against the DOL. The suit, which was filed in March, claimed that agents “oftentimes make rollover recommendations for purchase of annuities to IRA owners and participants in employer-sponsored 401k and similar benefit plans, for which they receive commissions or other compensation from annuity issuers.” The concern is that these agents will be adversely affected by the DOL’s new interpretation of the Fiduciary Rule that categorizes their status as investment advice fiduciaries under ERISA. ACLI believes that the new interpretation would achieve the same outcome as the 2016 Fiduciary Rule, which was rejected in the Fifth Circuit court. ACLI was one of the lead plaintiffs in that decision.

Finsum:The American Council of Life Insurers has put its support behind an ongoing lawsuit against the DOL and their new interpretation of the Fiduciary Rule.