Private Credit Moves Center Stage as JPMorgan Reassesses the 60/40 Model

JPMorgan Chase & Co.’s asset-management division is making a strong case that private markets should become a core stabilizer in modern portfolios, especially at a time when stock valuations look stretched and bonds are proving to be less reliable shock absorbers.

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With equities increasingly driven by a narrow group of mega-cap names and fixed income no longer consistently hedging downturns, the firm argues that the traditional 60/40 model needs meaningful reinforcement. In its 2026 investment outlook, the $4 trillion manager positions private credit, secondary transactions and opportunistic debt strategies as essential components rather than supplemental add-ons.

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According to David Kelly, chief global strategist at JPMorgan Asset Management, the old logic behind holding bonds is less dependable today.
“A key reason for having bonds in a portfolio is that they’re supposed to zag when stocks zig,” he said. “But when stocks zig and bonds zig as well, the diversification benefits disappear and that’s where alternatives really come in.”

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Private credit sits at the center of JPMorgan’s thesis, with strategists highlighting its “healthy premium” compared with public-market debt. At the same time, they stress that a diversified mix of private-market tools is critical for building portfolio resilience, especially in an environment where global growth could moderate.

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For years, Wall Street has floated variations of the 60/40 framework from allocating to commodities and real estate to experimenting with crypto. But the rapid wave of institutional money flowing into private markets suggests this shift is not just another tactical adjustment. What once lived at the fringes of portfolio construction is steadily becoming structural.

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Still, the transition is not without its skeptics. Critics warn that in times of market stress, private assets may not deliver the diversification or downside protection investors expect. Liquidity constraints and nonlinear pricing remain sticking points, especially as more capital floods into areas that historically benefited from limited participation. However, JPMorgan’s “60/40+” branding reflects a broader industry acknowledgment: the old playbook is evolving rather than disappearing, and private markets are increasingly being written into the first chapter.

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Kelly suggests the simplest way to integrate alternatives is by trimming both equity and fixed-income allocations while preserving the original 60/40 proportions.
“Investors can fund a 10%, 20% or even 30% allocation to alternatives proportionately from the 60% stocks and 40% bonds,” he said. “Making each of those slices slightly smaller still keeps the spirit of the allocation intact while improving diversification and adding more stability over time.”

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This year, megacap technology stocks have powered major indexes higher, with both the S&P 500 and Nasdaq 100 posting strong double-digit gains. Yet the concentration risk is hard to ignore. The so-called Magnificent Seven now make up roughly 35% of the S&P 500, pushing the index’s forward P/E ratio to around 23 times earnings. Those lofty valuations especially among AI-related names have some investors looking for assets with lower correlation and more predictable return profiles.

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“Everyone is excited about AI, and we share that enthusiasm,” Kelly noted. “But the real question is whether AI truly justifies the valuations of these enormous megacap companies or whether a day of reckoning eventually arrives. History suggests something will ultimately break.”

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Looking ahead, artificial intelligence remains a foundational theme in JPMorgan’s outlook, titled AI Lift and Economic Drift. The firm expects the technology to move from early-stage experimentation to broad, commercial adoption. Investors, it says, are now focusing less on AI as a concept and more on where capital should be allocated across the ecosystem. Private markets, in particular, stand to benefit.

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Venture funds, private-equity investors, infrastructure vehicles and private-credit providers all have exposure to the AI build-out, from chip manufacturing and data-center construction to model-training capacity and energy infrastructure. The report notes that massive spending by cloud hyperscalers is effectively channeling value away from public markets and into private hands.

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When it comes to the macro backdrop, Kelly does not expect the US economy to slip into recession over the next year, though he acknowledges that widespread concerns remain.
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“We anticipate moderate growth,” he said. “For many Americans, it may still feel like a sluggish, uninspiring economy. But the surge in capital spending tied to AI, combined with healthy consumer activity from higher-wealth households, should keep growth intact assuming no major shocks hit the system.”

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In JPMorgan’s view, the message is clear: the core principles of the 60/40 portfolio are not obsolete, but they need recalibration for a world where markets behave differently and technological disruption is reshaping how capital is deployed. Today, that recalibration increasingly points toward private markets not as fringe alternatives, but as core building blocks for long-term resilience.

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