Concerns about inflation may have created headwinds for bonds, but fixed-income returns are managing to outpace the stock market, as its post-election rally has been undone by a brewing trade war and losses from the big technology stocks that had led the bull market.
The Morningstar US Market Index was down 0.6% as of Wednesday’s close, while the Morningstar US Core Bond Index was up 2.3%. With the so-called “Trump bump” after the election having largely been erased, since Nov. 5, stocks are up 2.5%, while the Core Bond Index has returned 1.7%.
Bonds Providing Ballast
Dominic Pappalardo, chief multi-asset strategist at Morningstar, says bonds are fulfilling their traditional role in a portfolio, providing a short-term offset to declines in the stock market. “Fixed income has been providing some ballast and hedging benefits through the recent market turmoil, displaying the traditional negative correlation between stocks and bond…
