Skip to main content

Stocks and Bonds Rose Together. Now Both Are Faltering. What to Do?

The S&P 500 has slid 13% so far this year, and the Bloomberg U.S. Aggregate bond index has lost 10%.
  • Author:
  • Publish date:

From 2009 until early this year, stocks and bonds largely rose together. But now they’re falling together.

The S&P 500 has slid 13% so far this year, and the Bloomberg U.S. Aggregate bond index has lost 10%.

The indexes are on pace for their biggest simultaneous fall since 1976, when Dow Jones Market Data started following the numbers, . 

The only other year when the two indices both fell was 1994, and that was only 1.5% for the S&P 500 and 2.9% for the Agg index.

Soaring inflation and the Federal Reserve’s program to raise interest rates are pushing down both stocks and bonds.

Consumer prices climbed 8.5% in the 12 months through March, a 40-year high. And the Fed is expected to continue lifting interest rates through year-end and into next year.

Bonds are supposed to act as a buffer to protect investors’ portfolios against falling stock prices, but, obviously, that's not happening now. 

So what’s an investor to do?

Scroll to Continue

bovada Recommends

Safe Individual Bonds, Consumer-Staple Stocks

Bonds are starting to offer more attractive yields amid the Fed’s action on interest rates. So investors might consider individual bonds that can protect them from falling stocks.

. As Treasury bonds, they’re very safe, and their yield varies with inflation. That’s quite an advantage now, given soaring prices. The bonds yield 9.62% through October.

As for stocks, consumer staples and commodity-related shares have escaped much of the carnage this year. 

Consumer staples generally do well in times of economic weakness, and we may soon be in one. Commodity-related stocks are benefiting from inflation, which has pushed up the S&P GSCI commodity index 36% so far this year.

Among consumer staples, Coca-Cola  (KO) -  has gained 7% during that period, warehouse-club retailer Costco  (COST) -  is off 7% this year and snacks giant Mondelez  (MDLZ) -  has ticked down 2.4%.

As for commodity stocks, Chevron  (CVX) -  has soared 38% so far this year.

The author of this story owns Apple bonds and Coca-Cola stock.