What's going on with my bonds?

Bonds year to date are off to their worst start since at least 1975.  And for the first time in 25 years, the correlation between bonds and equities is at its highest level.  Most often, when the equity markets go down, fixed income helps provide investors with a reprieve from the volatility.  However, currently bonds and equities are going down simultaneously.  Bonds have had a much bigger contribution to the declining markets than in the past.  Consequently, there has really been few places to hide in this unique and unusual market environment.

But at the same time, bond yields are attractive for the first time in years.

Going forward, once the correlation normalizes, rates should fall amid a struggling economy. Then bonds may once again provide a buffer to portfolio losses.

What is going to help bonds get back on track historically? Slowing economic growth, moderating inflation, and easing of the Fed tightening should help going forward.

Therefore, despite the negative performance year to date, we still believe bonds are a valuable part of a portfolio, especially with the economic backdrop we see unfolding.

If you have questions about your portfolio and specifically your bonds, please give me a call. I welcome the opportunity to talk to you in greater detail. 

To listen to the entire client webinar by Larry Adam entitled “Quarterly Coordinates: A time for Finesse” please click on the link below.

Investment Strategy Client Call (raymondjames.com)