Investment outlook and asset allocation in US pension funds

Abstract

The classic balanced portfolio for more than 7 decades has been the blend of equities and bonds in the
ratio of 60−40%, respectively. But declining interest rates have forced investors to divert from this investing
strategy and look over other alternatives. This has affected bond returns. And once again due to pandemic
interest rates were cut down to near zero resulting in very little returns in bonds. To overcome this, alternative
investment opportunities should be looked for and several factors which are important in deciding the future
investments are to be considered. Some of them are interest rates, valuations, volatility, etc., Based upon the
factors and other parameters, the best alternatives will be Equities (cyclical industry, stocks providing dividends,
etc.), Corporate bonds (with higher investment grades), and government bonds of emerging markets (like China
and Peru). These alternatives will act as better investment alternatives to traditional 60/40 asset allocation in the
current scenario.