S&P 500 Priced in Gold: What It Shows About Purchasing Power

For decades, the traditional 60/40 portfolio benefited from a nearly perfect backdrop: falling interest rates, stable inflation, expanding valuations, and stocks and bonds frequently moving in opposite directions. It worked so well that many investors stopped questioning the assumptions underneath it.

The relationship between stocks and bonds has changed dramatically. For years, correlation was largely negative; recently, it has shifted meaningfully positive. When correlations rise, the assets designed to protect you can decline together, diversification becomes less effective, and early retirement losses can become much harder to recover from. Accumulating wealth and preserving wealth are two different games — sophisticated investors focus on what assumptions their portfolio depends on.