(Bloomberg) — JPMorgan Chase & Co.’s asset management arm is pitching private markets as essential ballast to investor portfolios amid stretched stock valuations and unreliable bond hedges.
With stock gains increasingly driven by a handful of large caps and bonds potentially offering less protection in downturns, the traditional 60/40 portfolio mix needs reinforcement, the $4 trillion asset manager said in its 2026 investment outlook. Private credit, so-called secondaries — markets where limited partners can sell their stakes to other institutions — and opportunistic debt strategies should be treated as essential, not optional, the firm says.
“A key reason for having bonds in a portfolio is that they are supposed to zag when stocks zig. But if stocks zig and bonds zig too, then you lose the diversification benefit from diversification into bonds,” said David Kelly, chief global strategist at JPMorgan Asset Management. “This is where alternatives come in.”
Private credit is the centerpiece of JPMorgan’s view, with strategists pointing to its “healthy premium” over public debt. But they also highlight the need for range of investments as ways to build resilience if growth slows.
Wall Street has proposed tweaks to 60/40 for years — adding commodities, real estate and even crypto to investment strategies. But the recent surge of institutional flows into private markets signals something more permanent. What once lived at the edges of a portfolio is now being folded into its foundation.
The shift isn’t without controversy. Critics warn that some of the benefits — from diversification to downside protection — may not hold when markets come under pressure. Liquidity gaps and opaque pricing remain key concerns as more capital moves in.
Still, JPMorgan’s “60/40+” framing captures a broader turn: The old playbook hasn’t been discarded, but it is being rewritten — this time around assets that used to sit on the sidelines.
Kelly argues that investors can reallocate to alternatives by trimming both stocks and bonds in line with their original 60/40 split — preserving balance while shifting portfolio structure.
“Investors can fund a 10% position or a 20% position or a 30% position in alternatives proportionately from the 60% stocks, 40% bonds and just make each of those slices smaller,” Kelly added. “And if they do that, we think it gives better diversification, more stability in the portfolio going forward.”
So far this year, megacap tech stocks have lifted the markets higher with the S&P 500 and the Nasdaq 100 posting double-digit gains. Still, concerns over concentrated and highly valued public AI equities — such as the Magnificent 7 comprising some 35% of the S&P 500 and the index’s forward P/E reaching 23x — are pushing some investors toward alternative assets with lower market correlation.
“Everyone’s very excited about AI and, indeed, we are excited about AI, too,” Kelly said. “But the question is: Does AI justify the valuations of all of these huge megacap companies, or is it going to be a day of reckoning? Chances are, eventually, something will go wrong and there will be a day of reckoning.”
Looking ahead, artificial intelligence remains a central theme as the technology shifts from so-called proofs-of-concept to large-scale adoption. According to the outlook, entitled AI Lift and Economic Drift, investors are now shifting focus on where to allocate capital across the AI value chain, with private markets offering broad opportunities from venture capital to data-center infrastructure. For instance, the outlook cites how massive hyperscaler spending is effectively channeling value from public to private markets, where private equity, infrastructure and private credit funds are driving the build-outs.As for the broader economy, Kelly does not foresee a recession in the year ahead, though he admits that worries about the outlook continue to persist.
“We think the economy will grow at a moderate pace. Perhaps for most Americans, it’s going to feel like a pretty mediocre, disappointing economy,” Kelly said. “But there’s enough of a surge in capital spending coming from the AI boom and in consumer spending from the increase in wealth of richer households that should keep this economy growing, barring some shocks.”
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