Bonds in a Crisis

Bonds are the portfolio's shock absorber. When stocks crashed 57% in 2008, US Treasury bonds gained 20%. That's not a coincidence — it's the relationship working as designed.

When fear spikes, investors flee to safety. Government bonds are considered the safest financial asset in the world. Demand surges, prices rise, yields fall.

But bonds aren't a magic shield. In 2022, both stocks and bonds fell simultaneously — the worst year for a 60/40 portfolio since the 1930s. Rising interest rates punish existing bonds. Short-term bonds and TIPS (Treasury Inflation-Protected Securities) held up better. The lesson: even your "safe" allocation needs thoughtful construction, not just a single bond fund.