Why are stocks and bonds down to start the year?
At any time in the markets there are multiple narratives, and 2022 is no different. The year began with investor concerns about how the Federal Reserve. Inflation is at 40-year highs and given the prolonged period of super accommodative monetary policy, the Federal Reserve must raise rates to cool the economy and tackle inflation without overreacting, potentially triggering a recession.
As geopolitical tensions mounted and Russia invaded Ukraine, international ex-U.S. equities and fixed income, which had been outperforming their U.S. counterparts year-to-date , quickly reversed. The benefits of diversification became much harder to see year-to-date as global asset classes have suffered very similar losses.
are rare. Since 1981, the Bloomberg U.S. Aggregate Bond Index only ended a year with a negative return four times . And consecutive years of negative returns has only ever happened twice, both in the 1950s. In 2021, the Bloomberg U.S. Aggregate Bond Index returned -1.5% on the year. Investors should brace for more volatility in the weeks, perhaps months, to come. While it's never fun to see your portfolio lose value, it's a necessary reminder that stocks don't only go up. Thankfully, over the long-term, the good years have far outweighed the bad ones.