What do current market movements in stocks and bonds have to say about 60/40 fund weights?

This is the May 2024 installment of a series of posts we make to track how the weights of a synthetic 60/40 stock/bond portfolio evolve intra-month.

Each month we coduct a simple experiment: track the cumulative intra-month return of two stock/bond indices (say SPY and TLT). Next, combine that data to estimate a one standard deviation envelope of weights as a function of the days in the month. Then measure where the current weights sit within the envelope. This provides a measure of how much a typical 60/40 fund needs to move in order to restore equilibrium.

Figure 1 depicts the envelopes and current weights for SPY and TLT.

Figure 1: Stock/Bond Weights For April 2024

Stocks and bonds have both had positive performance month-to-date.

They are essentially in line with historical weights. Nothing to see here.

See you next month.