Bank of America's chief investment strategist said that after experiencing the worst year since the global financial crisis, the highly sought after 60/40 portfolio is poised to recover.

An investment strategy that invests 60% of capital in stocks and 40% in bonds “should produce positive returns in 2023,” Michael Hartnett said in the bank's outlook for the next year released on Thursday.

Hartnett is optimistic about the performance of bonds in the first half of next year because he expects the recession to last 6-9 months in the first six to nine months of next year and not be too serious or traumatic. He said that once “the evidence clearly shows that interest rate peaks have passed and corporate profits have bottomed out”, the stock market will slowly rise in the second half of the year.

As central bank interest rate hikes raised concerns about a recession, global bond markets and stock markets were hit hard this year at the same time. A benchmark index measuring the performance of the US cross-asset market shows that a typical 60/40 portfolio is heading towards its worst year since the global financial crisis.

Hartnett also said that once investors begin to anticipate economic recovery, the prospects for small-cap stocks are “really very good.”

“We're not going back to a world of zero interest rates or quantitative easing, when you only needed to own big tech stocks and everything was fine,” he said. “People are looking for new frontrunners in the market, which will include small-cap stocks.”