Re: Huge losses going on in Bonds right now!
Posted: May 8th, 2022, 12:58 pm
JohnW wrote:They may still have a roll to play in your portfolio if you believe that their historical correlation and therefore the benefits of holding them will persist. However, at the moment, we are seeing evidence that their relationship with risk assets may be changing.
I don’t know what correlation they’d be better off having, or what’s coming, or what relationship with equities might change. But US bonds and stocks have had a negative correlation for 20 years (about -0.4), and a positive correlation of about 0.4 for 30 years before that. During that 30 year period government bonds returned 8%/year compound growth, and more than doubled in value in real terms. Predicting what will happen from here…..good luck.
https://www.bogleheads.org/forum/viewtopic.php?t=248325
Right. Too many people are of the erroneous view that Bonds are a straightforward hedge for falling stocks.. but it's not that simple. While that assumption has been true in the disinflationary environment that we have seen in the last couple of decades, in the past they have also been periods of positive correlation... there have been long periods where both sides of a supposedly "balanced" portfolio has done badly.