Leon Cooperman warns markets are 'too expensive' as war raises stagflation fears — why the 60/40 portfolio may not protect you

He continued, “I look around the world, and I say between Iran and the lack of leadership in Washington and the lack of integrity in Washington, that the market doesn’t deserve to be where it’s selling. It’s too expensive.”

That uncertainty is feeding into a growing concern on Wall Street: Stagflation — a combination of persistent inflation and slowing growth that can upend traditional investment strategies.

Cooperman is no stranger to the concept. Before founding his own firm, Omega Advisers, the investor worked at Goldman Sachs for 25 years, including during the 1970s at the start of his career, when stagflation hit the global stage.

This period was marked by oil price shocks, something that might feel all too familiar given today's headlines.

Here's a look at how understanding the past could impact planning your future investments.

The old investing rules don’t apply

For decades, investors have relied on a simple formula: Hold a mix of stocks and bonds and let diversification smooth out volatility (2).

In a stagflationary environment, stocks can struggle as growth slows (3). At the same time, bonds lose value amid persistent inflation as yields rise.

For example, in a traditional 60/40 portfolio, a 10% drop in stocks might normally be offset by stable or rising bond prices.

But if stocks fall 10% and bonds fall 5% at the same time, the entire portfolio takes a hit, leaving investors exposed on both sides.

“Since correlations have shifted, the obvious rebalancing between equities and bonds and instruments such as inflation-linked bonds and gold, isn’t protecting portfolios,” said Rajeev de Mello of Gama Asset Management (1).

In a changing environment, the traditional playbook might reassure investors, but it could also lead to misplaced confidence in their financial protection.

Why war is disrupting markets

War can disrupt energy supplies and push up commodity prices, keeping inflation elevated even as uncertainty weighs on economic growth.

That combination is what defines stagflation, one of the most difficult environments for investors to navigate.

History suggests that risk isn’t just theoretical. During the stagflation of the 1970s, both stocks and bonds struggled to deliver real returns, undermining the diversification investors rely on today, according to Kiplinger (4).

Despite that, some investors argue markets haven’t fully priced in the risk.

As Cooperman put it, markets may be acting as though conditions are more stable than they really are — even as the underlying environment becomes more fragile.

The playbook was never static

Not all investors see stagflation as a reason to pull back. Some see it as a shift in where opportunities lie.

For Helen Jewell at BlackRock, one key theme is the growing demand for energy driven by artificial intelligence.

“We were very clear that in order for AI to succeed, you’re going to need so much energy that the story is no longer about ‘instead of traditional energy,’ it’s about ‘as well as traditional energy,’” she said (1).

That shift highlights how quickly market assumptions can change — and why investors may need to rethink which sectors stand to benefit.

Adapt to new market trends

If you want to tap into the trends Jewell is describing, you could consider a more active approach, looking for opportunities created by shifting economic conditions.

Sectors like energy, infrastructure and defense have drawn renewed attention as geopolitical tensions reshape global demand — while artificial intelligence is driving new waves of investment across industries (5).

Select your own stocks

From here, the next step is to find a way to curate your favourite picks. That’s where brokerages come into play.

Platforms like Robinhood are designed to make investing simpler and more approachable.

If you prefer a more hands-on approach, you can also buy and sell individual stocks, fractional shares and options (for qualified traders) — backed by 24/7 support. Stocks, ETFs and their options trades are commission-free.

With access to popular ETFs like the Vanguard S&P 500, you can build diversified exposure without needing to pick individual stocks.

The platform also offers both a traditional IRA and a Roth IRA, so you can choose the tax strategy that fits your retirement plan.

With its recurring investment feature, you can set up automatic investments of your preferred fractional shares, stocks and ETFs on your own schedule.

Over time, this helps make investing a habit and steadily grows your portfolio.

Earn up to 3% on eligible account transfers to a taxable Robinhood account through March 25th. Risks and terms apply. Robinhood Gold ($5/mo) subscription may apply.

Get expert advice

But if you’re new to investing, you might want a little bit of help from the experts — and on a more personal level.

Moby offers expert research and recommendations to help you identify strong, long-term investments backed by advice from former hedge fund analysts.

In four years and across almost 400 stock picks, their recommendations have beaten the S&P 500 by almost 12% on average. They also offer a 30-day money-back guarantee.

Moby’s team spends hundreds of hours sifting through financial news and data to provide you with stock and crypto reports delivered straight to you. Their research keeps you up-to-the-minute on market shifts and can help you reduce the guesswork behind choosing stocks and ETFs.

Plus, their reports are easy to understand for beginners, so that you can become a smarter investor in just five minutes.

Stay the course

But for long-term investors, one approach is to keep consistent and avoid reacting to short-term volatility. This is a favoured move of another legendary investor, Warren Buffett — who has famously encouraged a patient perspective on investing.

His secret? Take it slow and steady with index funds or ETFs

Start small and dream big

The beauty of ETF investing is its accessibility. Anyone, regardless of wealth, can take advantage of it.

Even small amounts can grow over time — especially with tools like Acorns, a popular app that automatically invests your spare change.

Signing up for Acorns takes just minutes: Link your cards, and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio.

With Acorns, you can invest in a dividend ETF with as little as $5 — and, if you sign up today with a recurring monthly contribution, Acorns will add a $20 bonus to help you begin your investment journey.

Hedges to protect your future

For some, the goal isn’t to outperform the market — it’s to protect what they already have. If traditional diversification is weakening, some investors are looking beyond stocks and bonds for protection.

In investing, a “hedge” refers to an asset designed to hold its value — or even rise — when other parts of your portfolio are under pressure. The idea is simple: When stocks and bonds struggle at the same time, a hedge can help offset some of those losses.