The 60/40 Portfolio Strikes Back: Investing Through War and AI Mania
Stay on Target Through the Noise
After being declared “dead” following the brutal 2022 stock and bond selloff fueled by the highest inflation surge in decades, the traditional 60/40 portfolio has quietly delivered one of its strongest stretches in years. After a difficult four-year period following the pandemic marked by big inflation shocks, rising interest rates, wars, and extreme volatility across both stocks and bonds, balanced portfolios are once again doing exactly what they were designed to do: participate in growth while helping manage risk when conditions get messy.
Just this past year has been anything but ordinary. Since the start of 2025, investors have navigated the DeepSeek, Liberation Day, tech and Iran war selloffs of nearly 10% each, ongoing tariffs, banking and private credit concerns, and fresh geopolitical shocks tied to global oil supply risks. Along the way, the S&P 500 and NASDAQ experienced swift corrections with parts of the software and speculative growth sectors briefly falling nearly 50% from their highs. Yet disciplined diversified portfolios kept moving forward.
Wall Street Runs on Earnings. Cable News Runs on Fear
Difficult to see. Always in motion is the future. -Yoda
Some headlines are now warning investors about a potential energy-driven “Inflation 2.0” recession scenario tied to the Iran war, while others are comparing the renewed AI-driven tech rally to the late-1990s dot-com boom. Neither narrative is especially comforting.
Against that backdrop, we spent much of this past week calling clients and reinforcing an important point: their strategies are behaving exactly as intended despite a year of rapid macro and geopolitical shocks. Our balanced portfolios generated strong double-digit returns over the past 12 months, while several of our moderate growth strategies approached 20% rolling one-year returns, nearly double their targets. Quietly. Consistently. Without needing to chase every headline or speculative trend.
Our current portfolio strategies combine investment-grade short-term fixed income, tax-efficient positioning, and inflation-sensitive assets on the defensive side, alongside a globally diversified mix of asset classes, market caps, and sectors including materials, energy, industrials, infrastructure, staples, technology, and commodities on the equity side. We also remain slightly underweight traditional fixed income given the current inflation and rate backdrop.
Investing today requires more sophistication than simply owning a traditional mix of the S&P 500, Bloomberg Aggregate Bond Index, and MSCI international exposure. The market environment has changed, and portfolio construction has had to evolve with it. For many of our ultra-high-net-worth family office and private client portfolios, we also incorporate alternatives including structured notes, private equity, and private credit designed to help manage volatility, enhance diversification, and potentially improve yield and long-term return opportunities.
Investing by Headline Is Like Driving by Rearview Mirror
Never tell me the odds- Han Solo
Investing by headline is like driving while staring into the rearview mirror. By the time a recession, war, inflation spike, banking scare, or market correction dominates the news cycle, markets have often already priced much of it in. The stock market is forward-looking, constantly anticipating where earnings, interest rates, and economic conditions may head next 6 to 12 months down the road.
That is why some of the strongest rallies begin when headlines still feel overwhelmingly negative. Investors who make emotional decisions based on fear-driven news coverage often sell after declines and reinvest only after markets recover. Studies from firms like Fidelity Investments and DALBAR have repeatedly shown that investor behavior, not portfolio construction, is often the biggest reason individuals underperform the markets over time.
Successful investing is rarely about reacting to every headline. It is about staying unemotional, disciplined and focused on long-term fundamentals while others become distracted by short-term noise.
That is the bigger lesson investors often miss during periods of uncertainty. Successful investing is rarely about predicting the next crisis, Fed decision, war, or recession call. It is about building a disciplined portfolio aligned with your long-term goals and having the patience to stay invested when uncertainty feels the highest.
Because the real story is not just performance. It is durability. A disciplined allocation, rebalanced consistently, still works even when narratives shift and strategies fall in and out of favor. Investing through retirement should not look or feel like a table game in Vegas.
The Stock Market is not the Economy: Investing Through War and AI Mania
The Force Is Strong with Diversification
If you panicked and abandoned diversification after 2022, it may be worth asking why. Markets change fast. Sound investment principles usually do not.
Jon here. Two themes we continue discussing with clients stand out today. First, the stock market is not the current economy. Markets are forward-looking and typically begin pricing in economic conditions 6 to 12 months ahead.
Second, equity markets ultimately move on two primary forces: earnings and liquidity. Right now, corporate earnings continue to come in stronger than many expected. That strength is offsetting ongoing concerns surrounding tariffs, inflation pressures, geopolitical supply shocks, and tighter liquidity conditions.
This rally, once again driven by large-cap tech and artificial intelligence, is not simply speculative enthusiasm disconnected from fundamentals. Earnings growth continues to fuel much of the market’s resilience. In many ways, the AI-driven expansion looks more like the mid-1990s technology buildout than the late-stage dot-com bubble. Valuations have moderated, revenues remain strong, and capital spending continues accelerating at historic levels.
Big Tech’s AI push in the billions is now costing more than the moon landing. As a percentage of GDP, the projected 2026 spending plans of four major technology companies rival some of the largest capital investment cycles in modern U.S. history.
That is why stocks have continued climbing despite nonstop headlines surrounding oil prices, interest rates, deficits, tariffs, and geopolitical tensions. At this stage of the cycle, earnings matter more than fear.
It is also important to remember what ultimately drives the U.S. economy. Roughly 70% of GDP is tied to consumer spending. As long as the American consumer remains employed and continues spending, the foundation of the economy remains far more resilient than many headlines suggest.
It’s Not Going to Be a Smooth Ride
Do or do not. There is no try. – Yoda
This market continues getting more extreme, and not always in healthy ways. Gasoline prices in parts of the country, led by California, have pushed back toward $6. GDP growth has cooled closer to 2%, while Core PCE inflation has reaccelerated near a 4.3% annualized pace. At the same time, the bond market is shifting, with short-term rates moving higher again in a way that reflects inflation concerns more than improving growth.
There is also growing disagreement among central banks, from the Federal Reserve to the Bank of Japan. The message remains consistent: inflation risk is not fully behind us.
Outside the U.S., more economically sensitive regions such as Japan and Europe have stalled as growth expectations soften. Unlike the United States, many of these markets are not benefiting from the same AI-driven spending boom. Meanwhile, AI capital spending continues accelerating as hyperscalers like Meta Platforms
increase investment plans tied to infrastructure and artificial intelligence. The result is a market increasingly split between a slowing real economy and a narrow group of companies still benefiting from AI demand.
Even that leadership group is beginning to show signs of fatigue. Semiconductor stocks, in particular, have moved far ahead of themselves. We are now seeing companies report strong earnings only to watch their stocks fall afterward. That is usually not a fundamentals problem. It is an expectations problem.
From here, the path forward may become more uneven. Economically sensitive sectors are unlikely to lead in a slowing environment, while the AI trade may need time to cool after such a powerful run. This feels more like a market that needs to reset expectations than one ready to sprint higher in a straight line. We remain patient, diversified, and focused on long-term positioning rather than short-term headlines.
Fear is the path to Opportunity
The market’s sharp rebound in April may feel surprising given the nonstop headlines surrounding wars, tariffs, inflation, and policy uncertainty. But history shows markets often recover when investor sentiment feels the darkest. Some of the strongest rallies tend to begin when fear, not optimism, dominates the conversation.
We saw it after the pandemic panic of 2020, again following the inflation-driven bear market of 2022, and during the tariff and growth scares earlier this year. These rebounds are never guaranteed, but they often arrive long before investors feel comfortable again.
After a weak first quarter, the S&P 500 is now up roughly 5.3% year-to-date. That may not sound remarkable after recent volatility, but it reinforces an important point investors often forget during difficult stretches: markets spend far more time recovering than collapsing.
Historically, the S&P 500 has finished positive in roughly two-thirds of all calendar years since 1928. Since 1980, that number rises closer to three-quarters of the time. (see chart) Negative years happen. Corrections happen. Bear markets happen. But over longer periods, markets have consistently rewarded disciplined investors willing to stay invested through uncertainty.
None of this means markets rebound instantly or move in straight lines. They rarely do. What it does reinforce is how difficult market timing becomes during emotionally charged periods. The biggest mistake investors often make is abandoning long-term strategies precisely when volatility and fear peak the most.
Oil prices and the Strait of Hormuz
Oil prices remain one of the clearest ways the Iran conflict directly impacts consumers, businesses, and investors. Brent crude and WTI oil prices pushed back toward recent highs in April as tensions surrounding the Strait of Hormuz continued disrupting global shipping flows and energy markets. Markets also reacted sharply to a series of ceasefire rumors and failed peace negotiations, creating sudden swings across stocks, bonds, and commodities.
Even so, the stock market has remained surprisingly resilient in the face of higher oil prices. The bigger risk moving forward is not necessarily oil itself, but whether elevated energy costs begin spreading more broadly across the economy.
That is where the real inflation concern comes into play. If gasoline, diesel, and transportation costs remain elevated for an extended period, businesses eventually begin passing those higher input costs onto consumers through higher prices for goods and services. Economists refer to this as a “second-order effect,” and it is one reason the Federal Reserve continues watching energy markets so closely.
For now, the economy and corporate earnings have largely absorbed the pressure. But prolonged energy shocks have historically acted as a tax on both consumers and economic growth, particularly when sentiment and inflation expectations are already fragile.
That said, it is worth maintaining some perspective. The history of oil shocks suggests that inflation effects can fade once the underlying situation stabilizes. The 2022 spike in U.S. gasoline prices above $5 per gallon proved to be short-lived as supply conditions improved, even if it did create challenges for household budgets. Also, it is worth noting that the U.S. remains the world’s largest producer of oil and natural gas, which provides some insulation from global supply disruptions compared to prior decades. We are not living in the 1970’s.
For investors, this year also underscores the important contributions different parts of the market can make to balanced portfolios. For example, technology-driven sectors performed well over the past month, and the energy sector has contributed positively this year. Holding a portfolio that can benefit from all parts of the market continues to be important.
The bottom line? The market rebound in April demonstrates that positive swings can occur even during challenging times. A well-constructed portfolio, aligned with your long-term financial goals, is designed precisely to navigate Investing Through War and AI Mania. What has quietly stood out through much of this volatility is the return of the classic balanced portfolio.
For more information on our firm or to request a complimentary investment and retirement check-up, call (561) 210-7887 or email jon.ulin@ulinwealth.com.
Author: Jon Ulin, CFP® is the founder and Managing Principal of Ulin & Co. Wealth Management, an independent advisory firm based in South Florida for over 20 years. As a fiduciary wealth advisor, Jon helps successful individuals, families, and business owners nationwide with multi-generational planning, investment management, and retirement strategies. Learn more about Jon and our team at About/CV. or call (561) 210-7887.
Note: Diversification does not ensure a profit or guarantee against loss. You cannot invest directly in an index.
Information provided on tax and estate planning is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
You cannot invest directly in an index. Past performance is no guarantee of future returns. Diversification does not ensure a profit or guarantee against loss. All examples and charts shown are hypothetical used for illustrative purposes only and do not represent any actual investment. The information given herein is taken from sources that are believed to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as NewEdge Advisors, LLC does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.
