Your 60/40 Portfolio Could Break Your Retirement, Here's What To Think About: LFG Daily - November 21, 2025

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Luke Lloyd, CEO Lloyd Financial Group

Why a Recession Could Raise Long-Term Interest Rates — And Why Equities May Still Be the Smart Place to Be

Most people think “recession” and immediately picture falling interest rates, fleeing to bonds, and dusting off the old 60/40 playbook like it’s 1995.But the world has changed. The math has changed. And—most importantly—the government’s debt load has changed.

Today’s environment sets up a strange but very real possibility:

A recession where long-term interest rates rise, not fall.

Let’s break this down.

1. The Debt Elephant Is Now Sitting on the Bond Market

The U.S. government used to be the biggest safety net in the world. Now it’s the biggest borrower.

• Debt-to-GDP is cruising above 120%.

• Federal interest expense is growing faster than our defense budget.

• The Treasury must constantly roll over trillions at higher rates.

• Foreign buyers—Japan, China, even U.S. banks—are pulling back.

  
  

In that world, the math gets simple:

In a recession, government revenues fall… borrowing spikes… and long-end rates can climb as the market demands compensation for fiscal risk.

You could see a world where short-term rates get cut, but 10–30 year yields stay elevated—or even push higher—because Uncle Sam has turned the long end of the curve into a riskier asset than it used to be.

This is what I call the “fiscal-flation premium.”

2. Why Bonds Aren’t the Safe Haven They Used to Be

For decades, the 60/40 portfolio worked because bonds gave you two beautiful gifts:

1. Income

2. Diversification

   
   

Today?

• Income is better, yes…

• But diversification is broken.

• The correlation between stocks and bonds has been positive through major shocks.

• And the biggest risk in the whole system—U.S. sovereign debt sustainability—lives directly inside the bond side of the portfolio.

  
  

That means:

Bonds may no longer protect you in a downturn if the downturn itself triggers concerns about U.S. debt.

That’s the new world.

3. Why Equities Could Still Be the Safer Long-Term Asset

This sounds counterintuitive to the traditional finance world, but the data speaks clearly:

Equities, especially U.S. equities, are one of the only true inflation hedges.

They benefit from innovation, productivity, and global demand—not just Washington’s math.

They’re the first place policymakers support when things break.

Look at history:

• 2008: Equities bailed out.

• 2020: Equities bailed out.

• 2023 banking wobble: liquidity injections → equity markets stabilize.

  
  

Every time the financial system wobbles, policymakers act through the equity channels because that’s where Americans store their wealth—401(k)s, IRAs, pensions, state funds, insurance portfolios.

Even politicians know: if equities go down hard, consumer confidence collapses.

Equities are the engine. Everything else is the wiring.

4. The Wealth Divide Makes Equities Even More Important

Here’s the uncomfortable truth no politician likes to say out loud:

Those who own assets—especially equities—keep pulling away from those who don’t.

The top 10% own nearly 90% of stocks.The bottom 50% own almost none.

What does that mean?

Policy will always tilt toward stabilizing equity markets, because that’s where the political and economic power is concentrated.

Whether you like it or not…Whether it’s fair or not…It’s the reality.

The wealth divide forces policymakers to support asset prices—not bonds.

If anything threatens long-term equity values, the cavalry arrives.

5. The Bottom Line for Investors

We may be heading into an economic period that flips old assumptions upside down:

• A recession doesn’t guarantee falling long-term rates.

• Bonds aren’t the automatic safe haven they once were.

• The 60/40 model is structurally weaker in a high-debt world.

• Equities remain the most policy-supported asset class on earth.

• And long-term, equities continue to be the only reliable path to outpacing inflation and narrowing the wealth gap—for those invested.

  
  

This isn’t about taking wild risks.It’s about understanding the new macro reality and positioning smartly.

If the long end of the curve becomes unanchored in a recession, most investors will panic.

But the informed investor—the one who understands these dynamics—will stay disciplined, stay invested, and stay ahead.

Don’t leave your financial future up to chance. Let’s build a plan that gives you confidence today and peace of mind for tomorrow. Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

Colin Symons, CIO Lloyd Financial Group

What happened, Yesterday? There seems to be no obvious answer. The best I can come up with is systematic selling from the likes of CTAs. That particularly hurts because market makers have withdrawn stock liquidity, at less than half the YTD average.

Payroll data, overall, was fine, but stale, with the unemployment rate up a bit but jobs good.

It didn’t help that Fed comments were universally unhelpful:

The Fed’s Cook warned of a possible market drop due to high valuations. Arguably, this helped spur downside.

The Fed’s Barr said the Fed has to stay cautious with inflation at 3%.

Hammack said rate cuts may prolong inflation and boost risks.

Goolsbee was uneasy about ‘front loading’ rate cuts.

Even Miran said the Fed was unlikely to buy mortgage-backed securities (MBS.)

Despite that, rate cut odds rose.

This can potentially all come back very quickly, as I see no fundamental problems. Atlanta Fed GDPNow is strong, at 4.1%. Inflation expectations are heading down, with 10Y breakevens at 2.23%, where it was as high as 2.55% in Feb. Short-term (2Y) real rates seem to have peaked at 1.12% after Powell and are now at 1.04%. Rate cut odds actually increased yesterday, from 30% to 39%.

All that may seem too esoteric, but the basic idea is the things that have been hitting the market lately got better. Not good enough to stop systematic selling, though, and the market couldn’t take it, with low liquidity. That systematic selling has been going on for the last three days and will eventually end. If we were to get back over 6725, that would help stop the CTA selling.

Short-term, this recent downturn has been related to the Fed pushing against a December rate cut. The market started turning down when Powell said a December rate cut wasn’t a given, and the decline gets worse every time a Fed speaker echoes that idea, including yesterday. That has generally hit real rates, so we have a situation where the market is downgrading inflation expectations but the Fed is getting more hawkish, which raises real rates, which hits liquidity and risk assets with duration, like gold, crypto, and growth stocks.

This recent event is much more about liquidity, rather than recession risk. That’s causing a positioning unwind, even though there’s nothing fundamentally wrong.

In terms of what to do, 2Y Treasuries seem fairly easy to buy. Rates are going to come down, it’s just a question of when. Gold and gold miners also seem like good buys after the recent hit, as real rates are likely to come down and debasement risk remains very high.

Short-term, I admit stocks are a tough call. Fundamentally, growth remains strong but can the liquidity stress continue? This is why we may have to sell some stocks, as poor liquidity has now sent SPX below our risk level of about 6580. We’re certainly not alone in having to take risk management decisions, and that can continue if we see continued liquidity and stock-level problems.

Also short-term, I’d see if USD/JPY can drop to support markets. It’s at a point there the BoJ may intervene. We’re already seeing some rumblings, with volatility up.

Bottom-line, I continue to view this as positioning more than anything fundamental, and thus temporary in nature. I expect we haven’t yet seen the highs, probably even for crypto. AI and Mag 7 names should be fine to buy, though anything that’s been hit by low liquidity will probably do best.

The question is timing. I’d bet a reversal happens in the next week, and these moves can be fast and hard. It’s hard to know when the turn comes, though, which is why even we are looking at some amount of de-risking. Ideally we’d see the Fed talk up a December rate cut or real rates relax more, to help get upside.

I remain bullish, but it’s hard to catch the falling knife, right now. I’d like to claim the bottom happened yesterday, as it was lacking in a good catalyst, but that’s an awfully hard thing to put money behind, right now. Futures are up, though.

Sep. payrolls data showed 119K jobs vs. exp. 51K but 4.4% unemployment vs. prev. 4.3%.

Jobless claims were 224K vs. exp. 223K but continuing claims drifted higher, to 1.974MM.

The Fed’s Cook warned of a possible market drop due to high valuations.

The Fed’s Barr said the Fed has to stay cautious with inflation at 3%.

Hammack said rate cuts may prolong inflation and boost risks.

Goolsbee was uneasy about ‘front loading’ rate cuts.

Even Miran said the Fed was unlikely to buy mortgage-backed securities (MBS.)

Japan is helping blow up the world, as their planned stimulus package is sending their bond and stock market crashing and causing ripple effects through the world, most notably in gold and crypto. That’s causing a flight to safety and a bit of a raise in rate-cut hopes, now up to 43%, from 39%. Their Finance Minister came out later in the day to calm markets but the Nikkei is down over 3%.

Yesterday saw strong NVDA earnings morph into heavy downside as systematic selling overwhelmed markets and maybe concern about the coming Japan budget plan. Universally hawkish Fed commentary also wasn’t a help. I don’t really see fundamental problems, though, with inflation expectations lowering, real rates improving, and Fed cut odds rising.

That downturn yesterday finally saw some decent volume, setting up the possibility that was the flush we needed to set a bottom.

Options Expiration (OpEx,) today, along with PMI and more Fed speakers.

What does it all mean? Systematic selling and Japan caused a lot of damage but fundamentals seem intact? Can we set a bottom on this or will more sellers appear? We’ll see what the end of the day brings.

Don’t leave your financial future up to chance. Let’s build a plan that gives you confidence today and peace of mind for tomorrow. Click here to schedule a meeting — I’m here to help you take the next step toward financial freedom.

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