Are bonds still a good hedge to stocks?
My answer: yes, but with a caveat. The conventional wisdom that bonds prices go up when stocks go down only holds if there are shocks to growth. Bonds have historically suffered in inflation shocks, such as the 1969 example. Overall, history shows it is rare to see negative returns in both stocks and bonds in the same year. Of the 24 years with negative equity returns since 1929, U.S. 10-year Treasuries generated positive returns in all but three.
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