All Weather

All Weather is Ray Dalio's answer to a question most portfolios never ask: what do you hold when you have no idea what the economy will do next? His observation is that every asset class has an environment it thrives in and an environment it suffers in. Growth surprises lift stocks. Deflation and falling growth lift long-term bonds. Inflation lifts gold and commodities. Since nobody can reliably call which environment is arriving, the sensible response is to own something tuned to each and stop guessing.

That produces a portfolio of 30% U.S. stocks, 40% long-term Treasuries, 15% intermediate Treasuries, 7.5% gold, and 7.5% commodities, rebalanced once a year and otherwise left alone. The two inflation hedges are not redundant: gold responds to monetary crises and currency debasement, while broad commodities respond to demand-driven inflation. They tend to show up at different times.

One thing worth being clear about. Bridgewater's own All Weather fund is not this. The fund is a risk-parity strategy, meaning positions are sized by how much risk each contributes and resized as market conditions change, and it runs levered, generally somewhere between 140% and 200%. What you see here is the unlevered public formulation at fixed weights. Same underlying idea, far simpler machinery, and no claim to be a replica. The difference shows up most in a volatility spike, where the real fund cuts exposure and this version does not.

The concentration to understand before holding it is the bond position: 55% in Treasuries, 40 of that in long duration. For four decades that was the best trade available, and the long-run record largely reflects it. 2022 reversed the pattern, with stocks and long bonds falling together while commodities helped and gold did not fully offset. That year deserves a look on its own before the forty-year number means much.

What All Weather offers is not the highest return available. An equity-heavy portfolio beats it over most long stretches, and comfortably. What it offers is a ride mild enough to stay on, which tends to matter more than backtests suggest, because a portfolio abandoned at the bottom returns nothing at all.

It rebalances every January, holds no view about markets, and asks nothing of its holder in between. It uses no leverage.