Seesaws on the playground are fun. Seesaws in portfolio values…not so much. Today, seesaws are quite instructive as a visual cue when it comes to one of this year’s biggest stories that doesn’t get talked about.
Investors hear from the press about the poor performance in the stock market and assume that’s why their account values are down. While it’s certainly significant, even those with a small allocation to stocks have suffered- so there must be something else at work.
Many clients have an allocation to bonds. The amount tends to vary depending upon income needs and risk tolerance. The more income someone needs, and/or the less risk they want, the more they tend to have in bonds. For most of the last 40 years, bonds effectively mitigated risk, especially in times of turmoil. However, for the first half of 2022, bonds had their worst six months since either before the Civil War or when George Washington was president, depending on the source (source: Vanguard). For clients with a traditional portfolio comprised of 60% stocks and 40% bonds, it’s the worst year since at least 1976 (source: Bespoke).
So what happened?