A ‘sleep like a baby’ portfolio is having its best year in nearly a century
Forget the 60/40 portfolio: Investors have had a much better option this year to get better diversification and stronger returns. Rather than the traditional split between stocks and fixed income, market participants in 2026 have been better off evenly splitting their bets four ways — among stocks, bonds, cash and commodities, according to Bank of America. The bank’s chief investment strategist, Michael Hartnett, called the allocation the “sleep like a baby” portfolio, one that is having its best year since 1933 and its third largest outperformance over 60/40 ever. In his weekly market note, Hartnett said the portfolio is obviously “not for all, but returns force allocators to raise low exposure to commodities … buy natural resources.” The recommendation comes with the market exploring new highs for stocks despite the Iran war, and seeing strong returns in commodities, in part because of the fighting. The S & P 500 is up more than 4% this year, while U.S. crude oil has soared more than 60%. Bond fund returns have been flat this year, though some strategies have made money, while cash is benefiting from decent yields as the Federal Reserve interest rates have been on hold . Money from four “C’s” For investors, Hartnett said the theme is that “money does grow on C’s” — specifically curve steepeners in the bond market, consumer cyclical and chip stocks as well as commodities.” Those trades will benefit, he said, as Wall Street discounts the return of a “narrative of nominal economic boom, Trump pivot to affordability to win midterms (China-U.S. trade détente in May), geopolitical need to monopolize chips, rare earths, minerals, oil to win AI war, a US [administration] happy to bail out strategic domestic companies, and underwrite allies that deliver oil & chips for dollars & Treasuries … and a tech bubble finally back-on in anticipation of largest IPOs in history of mankind.” Hartnett noted that even with money pouring into stocks, sentiment is not overheated as futures traders continue to raise hedges against potential equity weakness.
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