The Recent Rise In Rates Is Actually Good News for Bond Investors

Being a bond investor over the past two years has been brutal as the bond market, measured by the Bloomberg Aggregate Index, declined 13% in 2022 and is down another 2.5% so far in 2023. And to add insult to injury, bonds fell in tandem with stocks in 2022, robbing investors of their usual option of rebalancing from bonds to stocks when equities decline.

Before 2022, bonds enjoyed a 40-year bull market, only experiencing annual declines in four years (1994, 1999, 2013, 2021), with the worst being a negative 2.8% return. So, 2022’s 13% decline is an off-the-charts event.