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All-weather portfolio

The concept of building a mix that holds up across four broad macro environments: rising growth, falling growth, rising inflation and falling inflation.

The idea is environmental rather than predictive. Instead of forecasting which regime comes next, you hold assets that each do well in at least one of them: equities for rising growth, long bonds for falling growth, commodities and inflation-linked bonds for rising inflation, nominal bonds for falling inflation.

Because no forecast is required, the portfolio accepts that one or two sleeves will always be losing. The trade is a lower peak return in a strong equity decade in exchange for shallower drawdowns when that decade ends.

It is not a guarantee. Every sleeve can lose at once when real interest rates jump, and the approach usually needs leverage on the bond side to make the risk contributions comparable. Describe it as a framework for thinking about macro exposure, not a portfolio that cannot lose money.

Related: risk-parity, asset-allocation, diversification, sixty-forty-portfolio, risk-on-risk-off

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