May 5, 2021
With Treasury yields soaring, punishing other corners of the fixed income market in the process, advisors have their work cut out for them. Clients may be getting skittish about bond allocations, and the previously trusted 60/40 portfolio mix may not be as valuable as it once was.
In other words, it’s easy to see why clients may want to ditch bonds altogether, but it’s crucial for advisors to remind them about the diversification benefits offered by these fixed income products.
“Vanguard research found that when stocks worldwide sank an average of roughly 34% during the global financial crisis, the market for investment-grade bonds returned more than 8%,” says Vanguard’s Roger Aliaga-Diaz. “Similarly, from January through March 2020 the period encompassing the height of volatility in equities due to the COVID-19 pandemic bonds worldwide returned just over 1% while equities fell by almost 16%. And if we look at the markets over several full business cycles
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