A 60/20/20 portfolio strategy that includes 20% gold is a more resilient inflation hedge at a time when U.S. equities are offering historically low upside over Treasuries and investors are demanding higher yields for long-term bonds, Morgan Stanley Chief Investment Officer Mike Wilson said on Tuesday.

A 60/40 portfolio, which typically has 60% of its holdings in stocks and the remaining 40% in fixed income, counts on moves in the two asset classes to offset one another, with stocks strengthening amid economic optimism and bonds rising during turbulent times.

Wilson, however, favors a 60% allocation to equities and 20% each to fixed income and gold. Within bond markets, the prominent Wall Street bear prefers shorter-duration Treasuries of five years over the 10-year notes to capture rolling returns along the yield curve.

“Gold is now the anti-fragile asset to own, rather than Treasuries. High-quality equities and gold are the best hedges,” Wilson told the Reuters Global Markets Forum.

The strength of a dual hedge lies in the contrast: both hedge inflation, but equities are growth-linked risk-on bets, while gold rallies as a safe-haven when real rates fall in downturns.

U.S. stocks have rebounded from near bear-market levels following President Donald Trump’s “Liberation Day” tariff announcement on April 2, with the S&P 500 and Nasdaq Composite hitting several new highs in September – a historically weak month for equities.

Gold Prices Surge to Record High

Spot gold prices, meanwhile, surged past $3,700 an ounce to a record high on Tuesday, buoyed by mounting expectations of a rate cut by the Federal Reserve this week.

“The lows in April will prove to be great for many stocks. The moves we have seen since then in some of the most beaten down areas (have) already been remarkable,” Wilson said.

“Alpha is making a comeback since Liberation Day,” he added.

Alpha is the excess return over a benchmark to describe an investment strategy’s ability to beat the market.

Meanwhile, fund managers warned that Treasuries are losing some appeal as skepticism over the Fed’s independence is beginning to weigh on long-end yields.

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