Asset Classes For Different Market Conditions – Bridgewater All Weather Strategy 1

Many people wan’t to know which is the best asset class to have in different economic information. The problem is, this information is not readily available. And that which is available, may not be the most accurate. This article will look at the best asset classes to hold in different environment as stated by Bridgewater Associates.For those that don’t know, Bridgewater is one of the biggest and most successful hedge funds in America.

Below is the table Bridgewater produced:

The table above shows what assets to hold in different parts of the economic cycle ( Image from seekingalpha)

The table above shows what assets to hold in different parts of the economic cycle ( Image from seekingalpha)

From the above, we see that there are four different environments an economy can be in (from the standpoint of investing). Additionally, the best asset class to hold when each environment prevails is given. The four different environments are :

  1. Growth Rises relative to expectations : Hold Equities (stocks), Emerging Market Debt Spreads, Commodities and Corporate Spreads.
  2. Growth Falls relative to market expectations : Hold Nominal Bonds and Inflation-Linked Bonds
  3. Inflation Rises relative to market expectations : Hold Inflation-Linked Bonds, Commodities and Emerging market Debt Spreads.
  4. Inflation Falls relative to market expectations : Hold Equities and Nominal Bonds.


The best part of the Bridgewater All Weather Strategy is that to get a decent return (8% pa) year after year , all you need is hold the four different portfolios above each with the same risk. This is because by holding the above four portfolios, you diversify away the risk economic conditions have on your portfolio.

And the Bridgewater All Weather Fund is not just one that sounds good in theory. It’s performance levels have been outstanding.

all weather vs global asset allocation


The fund, relative has outperformed a globally diversified portfolio since inception in 1996. The all weather portfolio is best for passive investors with a long-term view. When it comes to equities, there is no point stock picking but rather it is best to buy an ETF of indices (eg FTSE and S&P 500). Same goes for commodities, buy a basket of items.  This portfolio is designed to be for life. An alternative to this is the Permanent Portfolio by Harry Browne and I will write about this in due time.