Global inflation has remained stubbornly elevated for the past two years, driven by rising goods prices, increasing labour costs and geopolitical tensions. Against this environment, is the classic global investment portfolio split of 60% equities and 40% bonds still relevant?

According to Matthew Spencer, Director of UK Retail at Orbis, Allan Gray’s offshore investment partner, it is risky business building a portfolio on this idea in an increasingly uncertain investment environment.

“The traditional portfolio assumes that equities provide growth during good times, while bonds offer protection during periods when equities perform poorly," explained Spencer, who recently spoke at Allan Gray’s The Times investment event.

He said that while this approach has delivered a terrific balance of risk and return for investors in recent decades, especially during market downturns where equities crashed in 1987, the early 2000s and the Global Financial Crisis of 2007-2008, the relationship between bonds and equities changes in periods of higher inflation.

“When inflation rises, the negative correlation between bonds and equities becomes less reliable. In some cases, both asset classes can come under pressure at the same time, reducing the diversification benefits investors have traditionally relied on,” he said.

Spencer believes there are several structural markers in the current environment that could contribute to a higher inflation environment in the years ahead. These include deglobalisation trends, nations prioritising domestic production, US companies reshoring manufacturing operations, and persistently higher labour and input costs.

Earlier this year, many predicted that global inflation would remain stable in 2026, however inflation concerns have returned to the fore, given impact of the Middle East conflict. In South Africa, inflation jumped to a two-year high in May.

So, what should investors do?

“In our view, investors should adjust both expectations and portfolios," said Spencer. “Rather than relying on a strategy that was well-suited previously, investors should consider what is likely to work from today's starting point.”

He argues that building a resilient global portfolio that can withstand a higher inflationary scenario requires broader diversification across asset classes, investment styles and sources of return.

The Orbis SICAV Global Balanced Fund – which has returned 15% in the last five years and 38% in the last year ended April 2026 (net of fees), says Spencer, is designed to win in varying scenarios.  The fund combines a range of asset classes including equities, fixed income, commodity-linked assets and inflation-linked bonds. Its holdings span multiple sectors and geographies, with positions in companies such as Samsung Electronics, Taiwan Semiconductor Manufacturing Company and Kinder Morgan, alongside assets including Icelandic government bonds, US Treasury Inflation-Protected Securities (TIPS), and gold mining companies such as Barrick Mining and Newmont.

“Investors should aim for true diversification – within asset classes, across asset classes and across investment styles. A wider toolkit that includes equities, fixed income, hedged equities and other differentiated investment approaches can help reduce concentration risk and improve the overall balance between risk and return,” concluded Spencer.