U.S. equities have continued their upward trajectory this year, but fixed-income investors are grappling with a persistent downturn in the bond market that has now lasted for five years. This divergence has prompted those seeking portfolio diversification to explore options outside of traditional bonds.
While newly issued bonds are offering higher coupon payments not seen in decades, the continuous rise in yields has heavily depressed the prices of older holdings. Consequently, total returns for these legacy bonds have weakened significantly, leading some market participants to look for more resilient alternatives.
Yields rose, so legacy prices crashed. Basic finance 101, but painful when it hits your retirement account.
Sounds like the classic ‘bond ladder’ is currently on fire. Time to diversify or suffer.
I wonder if equities will stay up while bonds keep falling. Divergence can’t last forever, surely?
Total returns are down despite higher coupons? That is a brutal reality check for traditional bond portfolios.