Yield Shock Disrupts 60/40 Strategy as Bonds and Stocks Fall in Tandem

The 60/40 portfolio strategy—long considered a bedrock of balanced investing—faces its sternest test in years as bonds fail to cushion equity losses. May’s surge in 30-year Treasury yields above 5% dragged both asset classes downward, violating the traditional inverse correlation between stocks and fixed income.

This breakdown comes just as the approach was regaining credibility. After years of skepticism, the 60/40 mix had outperformed the S&P 500 through mid-2025 with lower volatility, buoyed by six months of textbook negative correlation between asset classes—the strongest since 2021.

Market veterans note the regime shift reflects deeper structural changes. "When both your shock absorbers and engines fail simultaneously, it’s time to question the vehicle," says a Bloomberg Markets strategist. The phenomenon spotlights growing institutional interest in uncorrelated assets like cryptocurrency as potential portfolio hedges.