BlackRock Inc BLACK Strategists are said to be leaving the 60/40 portfolio in Favoring public and private investments and tactically holding bonds to navigate a higher interest rate regime.

What happened: strategists off BlackRock Investment InstituteBlackRock’s research arm, recommends “breaking up traditional asset allocation buckets and moving away from broad allocations to public stocks and bonds.” reported Bloomberg, citing a statement Tuesday.

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“These old assumptions do not reflect the new regime we are in – one in which major central banks are driving interest rates into recession to try to bring down inflation,” the strategists said.

Specific Sectors: They recommend focusing on specific stock sectors, such as energy or healthcare, and picking companies with robust cash flows and resilient supply chains that can withstand a recession, the report says.

“We believe in a new approach to portfolio construction” where “strategic views need to be more granular – across sectors and within private markets – to help build more resilient portfolios in the new regime,” the strategists said, according to the Bloomberg report .

Other experts have also made arguments in the past for reconsidering the 60/40 portfolio in an environment of persistently high inflation.

As of November 2022 prominent economist Nuriel Roubini had highlighted how inflation hurts both stocks and bonds, and people should reconsider the classic ’60-40′ investing strategy.

Fixed Income Allocations: BlackRock strategists also indicated that investors should reconsider their fixed income allocations, saying they favor tactical allocations to inflation-linked bonds and short-dated debt due to attractive yields and the ability to sustain above-target price pressures.

“We expect interest rates to stay higher than that federal reserve seeks to curb sticky inflation – and we don’t see the Fed coming to the rescue by…