BlackRock Just Declared the 60/40 Portfolio Dead. Here's What Replaces It.

Investment advisors have recommended the 60/40 portfolio for decades. The idea is to allocate 60% of your money to stocks and 40% to bonds. Following this allocation has helped investors diversify their portfolios in the past.

However, BlackRock (NYSE: BLK), the world's largest asset manager, has practically declared the 60/40 portfolio dead in a recent note to investors -- at least, for now. Is BlackRock right? If so, what will replace what has served as the de facto foundational rule of modern investing?

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Flipping the script

There's a simple reason why the 60/40 portfolio worked well for so long. Stocks and bonds have typically moved in opposite directions in the past. When the stock market fell, the bond market rose -- and vice versa. The problem now, though, is that stocks and bonds are often rising and falling together.

BlackRock noted that the S&P 500 (SNPINDEX: ^GSPC) fell during the week ending March 14, 2026, but government bonds offered "little refuge" as 10-year U.S. Treasury yields rose to 4.28%. When bond yields rise, bond prices fall.

What's going on to break the long-standing relationship between stocks and bonds? BlackRock explained, "Investors are demanding more compensation for the risk of holding long-term bonds given persistent inflation and high debt levels."

The fallout of the U.S. conflict with Iran has exacerbated the problem. With Iran disrupting traffic flow in the Strait of Hormuz, oil prices have soared. The result is that inflation is expected to rise. These expectations are driving bond yields higher, pushing bond prices lower.

Which investments work now

BlackRock acknowledged, "There are few places to hide from this near-term supply shock in our view. Government bonds and gold are not providing ballast as equities fall." If 60% in stocks and 40% in bonds is no longer the answer, what is?

Importantly, stocks remain a smart pick for investors -- but only certain stocks. BlackRock still likes U.S. equities, especially AI stocks. The asset manager believes that continued earnings growth, healthy profit margins, and strong balance sheets of large-cap tech companies focusing on AI make their stocks attractive. In other words, quality matters.

Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stands out as an AI stock that meets BlackRock's criteria. Alphabet remains an advertising juggernaut, powered by Google Search and YouTube. Google Cloud's revenue is growing rapidly. The company is also a top player in AI and other related emerging technologies such as quantum computing.

How should investors diversify their portfolios? Some types of bonds are still alternatives. BlackRock likes emerging-market hard-currency debt, especially in countries that export commodities such as Brazil. One option for retail investors along these lines is the iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ: EMB). BlackRock itself manages this exchange-traded fund (ETF) and includes Brazil as one of its top bond issuers.

Time for a new playbook

To be clear, although the 60/40 portfolio with stocks and bonds may be dead, diversification remains very important for investors. Putting all of your eggs in one basket is still as big a mistake as ever. What has arguably changed is how portfolio diversification should be achieved.

Stocks will always be a critical component of a diversified portfolio. I agree with BlackRock about the underlying reasons for buying high-quality AI stocks. I also echo the asset manager's view that the valuations of some infrastructure stocks are attractive and that these stocks could benefit from "mega forces underpinning structural demand."

I would also include large-cap energy stocks such as Chevron (NYSE: CVX) in the current environment. With rising oil prices likely to drive inflation higher, Chevron -- the world's third-largest energy company and largest U.S. producer of natural gas -- should perform well.

Keep in mind, too, that the dynamics that have caused the long-term relationship between stocks and bonds to break may well be only temporary. The 60/40 portfolio might be like the phoenix in Greek mythology, rising from the ashes.

Keith Speights has positions in Alphabet and Chevron. The Motley Fool has positions in and recommends Alphabet and Chevron. The Motley Fool recommends BlackRock. The Motley Fool has a disclosure policy.