Executive Summary
The story everyone tells about 2022 is that it killed the 60/40 portfolio. Stocks and bonds fell together instead of one cushioning the other, clients who’d been promised diversification watched both halves of their account go red at the same time, and the conclusion advisors walked away with was that the whole approach had quietly stopped working. Private credit, buffered ETFs, and direct indexing got pitched as the replacement, the “new 40,” built for a world where bonds can no longer be trusted to zig when stocks zag.
The part that gets skipped is what happened after 2022, not during it. BlackRock’s own research shows the correlation that broke down in the inflation shock has already started reverting back toward negative, and the “new 40” isn’t behaving like a settled answer either. Retail money poured into private credit through 2025 and then reversed hard in the first quarter of 2026. Neither side of this argument has aged the way it sounded like it would in late 2022.
Walt runs a solo RIA outside Austin, custodied at Fidelity, about a hundred households built over eleven years mostly on a plain 60/40 model with low-cost index funds on both sides. When 2022 hit he got the calls everyone in this business got that year, clients wanting to know why the bond half of their account was also losing money, since the whole point of the bond half was that it wasn’t supposed to do that.
He spent most of 2023 fielding pitches from wholesalers who all had the same slide, the correlation had flipped, the 60/40 was dead, and here was a private credit fund or a buffered ETF sleeve to fix it. He didn’t move the book. He also didn’t ignore the question, because it was a fair one.
Three years later he still runs mostly stocks and bonds, with a modest interval fund position he added carefully rather than wholesale. He didn’t get there by picking a side. He got there by watching what actually happened to both halves of the argument.
Why 2022 Convinced An Entire Industry The Mix Was Broken
The number that made the rounds doesn’t need much dressing up. Bank of America’s data, reported by Yahoo Finance, had the 60/40 down 19.4% year to date through the end of August 2022, on pace for its worst year since 1936. That’s a real number, and it happened to a portfolio that was supposedly built to avoid exactly that kind of simultaneous drop.
What made it feel worse than a normal bad year is that it broke a rule advisors had relied on without ever really examining it. Stocks and bonds are supposed to zig and zag. In 2022 they just zigged together, and a client who’d been told the bond sleeve was there to soften the blow watched it do the opposite.
That’s the moment the alternatives pitch found its opening. Not because the salespeople got smarter, but because the one thing advisors thought they could count on had just failed publicly, in real accounts, in a year everyone lived through together.
What The Correlation Data Actually Shows Since Then
Here’s the part that didn’t get the same headline treatment. BlackRock’s research on the stock-bond relationship lays out the whole arc, and it isn’t a story about a permanent break. Correlation ran consistently negative from 2000 through 2020, the textbook relationship everyone built portfolios around. It flipped abruptly in 2021 as inflation spiked, turning bonds into what BlackRock calls a risk accelerator instead of a shock absorber, which is the mechanism behind 2022.
Since then it hasn’t stayed broken. For much of the past two years correlation has traded close to zero, and BlackRock’s most recent read has it reverting to slightly negative again, tied to core inflation settling into a 2.5% to 3.0% range and inflation volatility coming down with it. The relationship that failed in 2022 wasn’t a law of finance getting repealed. It was a function of an inflation regime, and that regime has been fading for a while now.
None of this means 2022 didn’t happen or didn’t hurt. It means the specific mechanism that caused it isn’t a permanent condition, and a portfolio decision made in the panic of 2022 was priced off conditions that were already starting to change by the time most advisors acted on it.
The Alternatives Case Advisors Keep Hearing In Every Pitch Meeting
The wholesaler case isn’t baseless, and it’s worth stating plainly instead of dismissing it. Cerulli’s research on RIA model portfolios, covered by AltsWire, found the average RIA allocation to private markets sits at just 2.3% today, with 28.7% of RIAs planning to raise that allocation by 2026 toward a target closer to 3.1%. More than half of model portfolio providers, 53%, now offer or are actively considering models built around semi-liquid or illiquid alternatives. Cerulli projects advisers adding roughly $2 trillion in alternative assets over five years.
A separate industry survey, run by Excella and reported through PR Newswire, found 70% of surveyed RIAs now allocate client money to private credit specifically, up from 62% the year before, with 58% planning to increase that allocation again in 2026. More than 70% of the firms already in private credit are putting at least 4% of client portfolios there, and interval fund adoption among these firms jumped to 80% from 58% in a single year. That’s a real and fast-moving shift.
It’s worth being honest about what this data is. It’s a vendor-commissioned survey of firms already inclined toward the product, and it should be read that way. But the direction is consistent with Cerulli’s more independent numbers, and both point the same way. Advisors really are moving money into this category, and the pitch decks aren’t inventing a trend out of nothing.
Why The Alternatives Money Just Reversed Course In 2026
What the pitch decks don’t mention is what happened right after that growth got reported. R.A. Stanger’s fundraising data, covered by HedgeCo, shows retail and wealth-channel private credit fundraising fell 45% in the first quarter of 2026 compared to the same quarter a year earlier. That’s the fastest-growing replacement for the bond sleeve posting its own sharp reversal, in the same channel that was supposedly done with 60/40 for good.
This is the piece that gets left out of both versions of the story. The bond sleeve had one bad regime and got declared dead. Its replacement had one bad quarter and mostly didn’t make the same headlines, because nobody built a narrative around it the way they did around 2022. Both data points are real. Neither one is the whole picture, and an advisor who only heard the first half of either story is working from an incomplete set of facts.
The Three-Question Review For Any Bond Sleeve Change
None of this requires picking a side in the 60/40-versus-alternatives debate. It requires asking three questions about the fixed income piece of a client’s portfolio before deciding whether to touch it.
- What was the bond sleeve actually for. If it was there to fund near-term spending or dampen volatility ahead of a known need, a correlation regime that lasted eighteen months doesn’t change that job. If it was there purely to zig against equities, that’s the piece worth re-examining given what correlation is actually doing now.
- How much of the “replacement” allocation is liquidity a client will actually need on short notice. Interval funds and private credit vehicles carry real lockups, and a client who moved bond money into one of these in 2023 out of fear may not be able to get it back out on the timeline they now assume.
- Is the change being made because the client’s situation changed, or because a wholesaler’s slide deck was persuasive in a meeting. Walt’s own rule after three years of pitches is that he’ll move money for a reason specific to the household in front of him, not for a correlation chart from two years ago that may already be stale by the time he acts on it.
What This Actually Looks Like In A Client Meeting
Walt’s answer to his own clients, the ones who called in 2022 asking why the bonds were also down, wasn’t to defend the 60/40 or to abandon it. It was to explain what actually broke, that inflation had done something bonds hadn’t faced in forty years, and that the fix wasn’t necessarily a new asset class, it was patience plus a smaller, deliberate addition once he’d looked at the liquidity terms closely enough to explain them back in plain language.
The clients who moved money with him into the interval fund did it after that conversation, not during the panic. The ones who didn’t move anything are still mostly fine, because the correlation that scared them in 2022 has been drifting back toward normal since. Neither group got a portfolio built around a headline. They got one built around what their own money actually needed to do.
Our goal is to help advisors separate what actually changed in 2026 from what just got repeated the most times in a pitch meeting.
Portfolio construction is one piece of the wider practice, alongside the large-cap concentration risk question we’ve written about separately, and it connects directly to how much a retiree can safely pull from a portfolio each year, which we cover in our piece on the safe withdrawal rate. We write about the rest of what goes into running a firm well on our advisor resources page.
Grab twenty minutes and go through your own fixed income sleeve with us:
https://calendly.com/mark-ritzstevens/consultation
Sources: 2022 60/40 drawdown data via Bank of America, reported by Yahoo Finance. Stock-bond correlation research via BlackRock. RIA model portfolio and alternative allocation research via Cerulli Associates, covered by AltsWire. RIA private credit usage survey via Excella/Alternative Fund Advisors, via PR Newswire. Private credit fundraising data via R.A. Stanger, covered by HedgeCo.
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