MS Pro Briefing | 18th September 2025
60/40 mix, U.S. Housing Market, Concentration risk in S&P 500, and more..
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Actionable Insights
A 60/40 portfolio grows more slowly than an all-stock portfolio, but it provides important protection during downturns. Over the past 150 years, stocks faced 19 bear markets while a 60/40 mix only encountered 11. In serious crises like the Great Depression, the 1970s, and the 2000s, losses in a 60/40 portfolio were often about half those in stocks. This shows that mixing bonds with stocks can lower risk while still allowing for long-term growth.
The U.S. housing market is slowing mainly because homes have become too expensive, not because of financial instability. Most owners are sitting on low-rate mortgages and don’t want to sell, while buyers face record-high payments that are pricing them out. Sales and price growth have both cooled, but unlike 2008, household finances are much stronger, so any drop in prices is likely to be slow and limited rather than a sharp crash.
A small group of companies now controls nearly 40% of the S&P 500's market value. This creates a false sense of diversification. While investors may think their portfolios are well spread out, the significant influence of a few firms means that shocks specific to those companies or sectors can greatly affect returns. Notably, strong index representation doesn't mean strong performance, as many Mag7 stocks underperform much of the broader market.
Since 1945, stock price movements have changed significantly. Companies have cut payout ratios from over 90% to below 50%, choosing to reinvest earnings instead of giving them out as dividends. This has increased the duration of equities and made prices much more sensitive to changes in expected returns. Nowadays, expected returns explain over 90% of market price variation, while dividend growth plays a smaller role.