IMF research finds bonds may fail as 60/40 crash hedge, favors metals

The traditional 60/40 portfolio's diversification benefit may be eroding as stocks and bonds move in tandem.

IMF research shows stocks and bonds have become more positively correlated since 2019, challenging the long-held view that bonds protect portfolios during equity selloffs.

"Including commodities in an investor's portfolio could help protect against a potential shift in correlations," the International Monetary Fund said in its February research paper on stock-bond diversification.

During the 2022 bear market, the S&P 500 lost 18% and the Nasdaq-100 fell more than 32%. The Vanguard Total Bond Market ETF lost 13% that year, offering no protection. The iShares Silver Trust (SLV) gained 2.37%, while the VanEck Rare Earth and Strategic Metals ETF (REMX) lost 31.1% — roughly matching the Nasdaq's decline, according to fund performance data.

The findings threaten a core assumption of modern portfolio theory. If the correlation shift is structural, investors who relied on bonds for downside protection may need to rethink their asset allocation. The IMF's research points to commodities as a potential alternative, but the choice of which commodity exposure matters significantly.

SLV: 21.75% annualized returns over five years

The iShares Silver Trust tracks the price of silver bullion directly, holding no stocks and paying no dividends. Over the past five years, the fund has delivered average annual total returns of 21.75%, outperforming both the S&P 500 and the Nasdaq-100. In 2025, the fund returned 147.9%, driven by investor concerns about higher inflation and increased levels of government debt, as well as industrial demand from solar panel manufacturing. The fund charges a sponsor fee of 0.5%. Buying this ETF is purely a bet on the price of silver — if silver declines, investors have no dividend income to cushion the fall.

REMX: Negative returns since inception

The VanEck Rare Earth and Strategic Metals ETF holds a portfolio of 37 stocks across 10 countries involved in the production, refining and recycling of rare-earth and strategic metals. The fund has delivered average annual returns of 10.9% over the past 10 years but has lost money since its October 2010 inception, with an average annual return of negative 2.67%. A $10,000 investment at launch would be worth $3,876 today, according to the fund's published data. The fund charges a gross expense ratio of 0.53%. Many advanced technologies — including electric vehicle batteries, wind turbines and data center components — rely on rare-earth metals, which could support future demand.

Why the choice matters for crash protection

During the recovery from the 2008 global financial crisis, SLV outperformed the S&P 500 for five years from January 2008 to January 2013, demonstrating its potential as a hedge during prolonged downturns. However, precious metals remain volatile — SLV lost about 50% of its value after hitting an all-time high in January 2026.

REMX, by contrast, has shown a high correlation to technology stocks, limiting its diversification benefit during equity selloffs. Its 31.1% loss in 2022 was nearly identical to the Nasdaq-100's decline, suggesting the fund offers little protection during tech-driven downturns.

For investors seeking alternatives to the traditional stock-bond mix, commodities ETFs offer exposure to assets that may behave differently from equities during market stress. But the IMF's research shows that not all commodities are created equal — and that the old rules of portfolio diversification may need updating.

This article is for informational purposes only and does not constitute investment advice.