Investors are still coming out of one of the worst bond marketsin history.

Between the bond market’s dismal 2022 and the stock market’s downturn from the inception of the Russia-Ukraine war, the 2020s were the only market crash of the past 150 years when the decline experienced by a 60/40 portfolio was more painful than the decline experienced by an all-equity portfolio.

Earlier this year, we demonstrated a key lesson from the past 150 years of stock market crashes: Though we can guarantee that there will be bear markets in our future—on average, about one a decade—the stock market will always recover and go on to new highs.

But what happens to an investor’s portfolio if one of those bear markets begins at a terrible time—like just as an investor is approaching her intended retirement date? Or if she’s faced with the worst bond market in history?

To evaluate the power of diversification in staving off the losses of a market crash, we took a look at the same period through the lens of the 60/40 portfolio. Here’s what we found:

  • As with the stock market, it’s impossible to predict how long it will take for the bond market or a 60/40 portfolio to recover from a downturn.
  • The upside potential of a 60/40 portfolio is a lot less than that of an all-equities portfolio, but the depth of inevitable market downturns will be much less.

Here’s what the past 150 years look like for the 60/40 portfolio.

150 years of market crashes through the lens of the 60/40 portfolio

There have been 19 bear markets for stocks and three bear markets for bonds over the past 150 years—that is, periods in which these investments’ value has declined by 20% or more. This has translated into 11 bear markets for a 60/40 portfolio.

Our stock market analysis uses data that former Morningstar director of research Paul Kaplan compiled for the book Insights into the Global Financial Crisis. (Note: This data includes monthly returns going back to January 1886 and annual returns for the period from 1871-85.) Our historical bond market analysis uses data that economist Robert Shiller compiled for his book Market Volatility, which is derived using an equivalent of the 10-year government-bond yield.

As we’ve shown previously, when you incorporate the effect of inflation, $1 (in 1870 US dollars) invested in a hypothetical US stock market index in 1871 would have grown to $30,369 by the end of May 2025. A dollar invested in a hypothetical US 60/40 portfolio in 1871 would have grown to $3,966 over the same time horizon.

Unsurprisingly, the ultimate growth was much less for a 60/40 portfolio than for the stock market.

But the point isn’t how much the 60/40 grew—it’s how much it didn’t lose during downturns. Consider some of the worst periods on this chart:

  • The Great Depression: The 79% stock market crash known as the Great Depression (illustrated in more detail on the table below) is the worst drop on the chart, but if you held a 60/40 portfolio, you only experienced a 52.6% decline.
  • Inflation, Vietnam, and Watergate: The 60/40 portfolio’s 39.4% decline in the early 1970s was the third-worst drop on this chart for the 60/40 but still substantially less than the stock market’s decline of 51.9%.
  • The Lost Decade: The stock market declined 54% over the course of the 2000s (a time that included both the dot-com bust and the Great Recession), and it didn’t climb out of this hole until May 2013. The 60/40 portfolio, on the other hand, declined 24.7% in the early 2000s—less than half as much as the stock market did. And it briefly got out from underwater in 2007 before it started heading back down a second time in October 2007.

The pain of stock market crashes vs. the pain of crashes in the 60/40 portfolio

So, how severe were these market crashes?

To assess the level of pain experienced in each market crash, we use a framework Kaplan calls the “pain index.” This framework considers both the depth of each market decline, as well as how long it took to get back to the prior level of cumulative value. And to gauge the severity of these downturns, we measure the volume of the “lake” that one creates.

The table below shows how all stock market declines and 60/40 portfolio declines of the past 150 years compare with the worst downturn since 1870—the stock market crash of the Great Depression.

That is, the stock market crash during the Great Depression has a “pain relative to worst historical loss” of 100%. And during this same period, a 60/40 portfolio only has a “pain relative to worst historical loss” of 23%. So because the 60/40 portfolio declined 53% versus the stock market’s 79% (and because it recovered to its previous high so much faster), investors who held the 60/40 portfolio only experienced about a fourth of the pain that those who held all stocks did.

The table below lists the bear markets of the past 150 years, sorted by the severity of pain.

As you can see, the 60/40 portfolio experienced less pain than the stock market during nearly every market crash of the past 150 years.

The Great Depression was 4 times more painful for the stock market than for a 60/40 portfolio. The Lost Decade, the longest period on this chart, was more than 7 times as painful for the stock market. And the covid-driven stock market crash of March 2020 barely even registered for the 60/40 portfolio (which clocked only an 8.5% decline). In aggregate, a 60/40 portfolio experienced 45% less pain than an all-equities portfolio during the stock market crashes of the past 150 years.

Interestingly, there was only one period that saw more pain for the 60/40 portfolio than for the stock market—the period we’re in now.

When the 60/40 portfolio experiences more pain than the stock market

Both the stock market and the 60/40 portfolio entered bear-market territory in December 2021, owing to the Russia-Ukraine War, increased inflation, and supply shortages. And at that point, the bond market was already experiencing a downturn that began in April 2020 with the covid-driven market crash.

However, while the stock market recovered to its previous high in September 2024, the bond market has not yet fully emerged from underwater. This decline was so severe that it’s prevented the 60/40 portfolio from returning to its previous high—marking the only time in the past 150 years that the 60/40 portfolio experienced more pain than the stock market.

Nonetheless, even in this once-in-150-years bond bear market, the depth of the decline experienced by a 60/40 portfolio was less than that of either the stock market or the bond market alone.

And this reiterates why we diversify: So regardless of whether the next once-in-a-lifetime market decline comes from stocks or bonds, the pain experienced by your portfolio won’t be as severe.

Market crashes: Stock market vs. 60/40 portfolio

To better understand how market downturns may reverberate across the stock market and a 60/40 portfolio, let’s consider two periods through the lens of percentage lost, or not lost.

Lost decade (Dot-Com bust and Global Financial Crisis): 2000-13

This market crash began in August 2000 with the dot-com bust, and the stock market never fully recovered until May 2013 (after the global financial crisis).

When the stock market was at its September 2002 trough, having lost 47.2% from its previous high, the 60/40 portfolio had only lost 24.7% of its value.

And after a brief period where the stock market seemed to be on its way up in 2007, it dipped again. The stock market hit its second trough (ultimately its lowest point in this entire period) in February 2009—when it was worth 54% less than its previous high. At that point, the 60/40 portfolio was worth 23.7% less than it once was.

In total, the “pain relative to worst historical loss” was 8 times greater for the stock market than for the 60/40 portfolio during this period.

This pattern of the 60/40 portfolio experiencing less severe and shorter declines than the stock market has also surfaced throughout most of the other market declines in our history.

Ukraine, rise of inflation, and supply shortages: 2022-Present

Conversely, consider the market decline from which we’re still emerging today.

The stock market (and by extension, the 60/40 portfolio) took a 28.5% downturn in late 2021 because of the Russia-Ukraine War, increased inflation, and supply shortages.

At that point, the bond market was still in the depths of a decline that began in April 2020.

Though their total losses during 2020 were minor, bonds remained underwater through 2021 and had a particularly bad 2022—the one year in our whole 150-year period in which bonds didn’t provide any diversification benefit during a market downturn. Taken together, the 60/40 portfolio declined 25.1% in 2022.

The role of the 60/40 portfolio in surviving market downturns

So, are we really living through a once-in-a-lifetime investing event?

Maybe.

But even though the 60/40 portfolio’s current bear market is lasting longer than the stock market’s most recent bear market did, it’s worth remembering that it never reached a deeper decline.

The 60/40 portfolio softened the blow of nearly every market crash: A couple of the episodes on our original timeline of stock market crashes didn’t even register on the 60/40 portfolio’s list of bear markets. And the reverse is also true for bonds: While bonds stayed in a bear market for a full 40 years in the mid-20th century, 60/40 portfolios recovered from various downturns and went onto new highs.

But we can’t know how long it will take for the markets to recover from a crash—or where the next crash will come from. So, diversification is still the best way to navigate market uncertainty—across both the stock and bond markets—while staying invested for the long term.

This article includes data and analysis from Paul Kaplan, Ph.D., CFA, former director of research with Morningstar Canada, and Hal Ratner, head of research for Morningstar Investment Management.

Data journalist Bella Albrecht and Morningstar magazine editor-in-chief Jerry Kerns also contributed to this article.