Bonds swoon into bear market territory
It's not just stocks. A key index tracking global bonds has also reached bear market territory.
Why it matters: Market behavior this year has thrown a wrench in the traditional 60/40 strategy — the idea that if stocks are down, then bond performance will offset the losses, and vice versa.
State of play: The benchmark S&P 500 index plunged by as much as 24% this year, and though it’s rebounded, many analysts say we’re still deep in a bear market.
- But for most investors, their bond portfolios won't help them out either. A flagship Bloomberg index of global government and investment grade corporate bonds is now down more than 20% versus its peak in January 2021.
A bear market — or a 20% decline from a recent peak — is rare for these higher-credit quality bonds, since they tend to be much less volatile than the stock market.
- The drawdown over the last year and a half is the index's largest fall since its inception in 1990, Bloomberg reports.
What to watch: Whether a similar index of U.S. bonds, which is currently down 12.6% from its peak, heads closer to bear territory as well.