08/01/2023
2022 was the worst-ever year for U.S. bonds. How to position your portfolio for 2023
The bond market suffered a significant meltdown in 2022.
Bonds are generally thought to be the boring, relatively safe part of an investment portfolio. They’ve historically been a shock absorber, helping buoy portfolios when stocks plunge. But that relationship broke down last year, and bonds were anything but boring.
In fact, it was the worst-ever year on record for U.S. bond investors, according to an analysis by Edward McQuarrie, a professor emeritus at Santa Clara University who studies historical investment returns.
The implosion is largely a function of the U.S. Federal Reserve aggressively raising interest rates to fight inflation, which peaked in June at its highest rate since the early 1980s and arose from an amalgam of pandemic-era shocks.
Inflation is, in short, “kryptonite” for bonds, McQuarrie said.
