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The Death of Bonds: Why the 60/40 Portfolio is DOOMED

Francis Hunt - ITM Trading Dec 19, 2024

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For decades, the classic 60-40 portfolio—a mix of 60% equities and 40% bonds—has been the cornerstone of financial planning. It was a simple, reliable strategy that promised growth from stocks and stability from bonds. But today, this long-standing investment paradigm is unraveling. Bonds, once deemed “risk-free,” are now anything but. Could this signal the end of debt as a reserve asset?

Let’s explore why the 40-year dominance of bonds is over—and why gold and silver are reclaiming their rightful place in preserving wealth.

The Bond Market’s Fatal Flaws

Since the 1980s, falling interest rates and bond yields provided a stable counterbalance to volatile equities. But starting in 2020, the cracks in this system began to show. With inflation surging and central banks flooding the market with liquidity, bond yields have been unable to keep pace with the true rate of inflation. According to ShadowStats, inflation-adjusted bond yields are now deeply negative, eroding wealth rather than preserving it.

And then there’s the risk of contagion. Debt markets, bloated with quadrillions in derivatives, are poised for a potential collapse. If interest rates spike sharply, the capital values of bonds could plummet to unprecedented lows. The so-called “risk-free” asset could become a toxic liability overnight.

The New Reserve Asset: Gold and Silver

In contrast, gold has stood as a multi-millennial reserve asset, immune to the whims of governments and central banks. While gold was sidelined during the financialization of the 80s and 90s, its intrinsic value never diminished. Legacy wealth families, who understand the importance of stability, still allocate as much as 33% of their portfolios to gold—a lesson that modern investors are beginning to relearn.

Gold and silver are more than mere “hedges” against inflation. They are tangible, scarce, and universally recognized stores of value. Unlike bonds, which depend on government promises, gold relies on no one. And as the financial system shifts toward digitization and tokenization, physical assets like gold will become even more critical for wealth preservation.

The Rise of Digital Gold and Its Challenges

While gold’s resurgence is undeniable, a new competitor has emerged: digital assets like Bitcoin. Proponents argue that Bitcoin is the “digital gold” of the future. Institutions and hedge funds are piling into crypto markets, drawn by their potential for massive growth.

But here’s the catch: cryptocurrencies come with extreme volatility. Bitcoin, for example, has suffered multiple 80% drawdowns in its history. For those seeking true stability, gold remains unparalleled. Even during market turmoil, gold’s lower volatility makes it a cornerstone of a resilient portfolio.

Moreover, the push toward tokenization—a system where physical assets like gold are digitized and tracked on blockchains—raises concerns about privacy and control. While such systems promise efficiency, they also introduce vulnerabilities, making it critical for investors to hold a portion of their metals off-grid.

A Coming Reset? The Case for Action Now

The current system of fiat currencies and debt-based markets is teetering on the edge of collapse. With central banks continuing to print trillions, inflationary waves are poised to accelerate. At some point, the global financial system may face a “reset” moment—a stopgap event where debt is devalued, and assets like gold are revalued to much higher levels.

When this happens, access to physical gold could become severely restricted. Governments may mandate the tokenization of all gold holdings, effectively eliminating privacy and control for investors. Those who wait too long may find themselves locked out of the market entirely.

Navigating these seismic shifts in the financial landscape requires expertise and foresight. At ITM Trading, we’ve spent over 28 years helping clients build resilient portfolios that withstand economic uncertainty. Our family-owned business is dedicated to empowering you with personalized advice and trusted solutions. Whether you’re looking to diversify with gold, silver, or other precious metals, our team is here to guide you every step of the way.

The Bottom Line

Bonds are no longer the safe haven they once were. The rise of inflation, digital currencies, and a looming debt reset are transforming the financial landscape. For those who value privacy, stability, and long-term wealth preservation, the answer is clear: gold and silver are not just options—they are necessities.

Don’t wait for the system to collapse before securing your wealth. Contact ITM Trading today to speak with one of our experts about creating a strategy tailored to your goals.

Sources & References In This Article

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