The Strategist

Global bond market enters bearish phase for the first time in 40 years

09/05/2022 - 11:32

For the first time since the middle of the 1980s, the global bond market has entered a negative period, according to Bloomberg. The reason was a rapid increase of interest rates by global central banks in response to acceleration of inflation.
According to Bloomberg, the global bond market has entered a bearish phase for the first time in 40 years as a result of central banks' commitment to stifle inflation, even at the expense of an economic downturn.

The Bloomberg Global Aggregate Total Return Index, which measures the yields on investment-grade corporate and government bonds, has dropped more than 20% since its peak in 2021, marking the largest decline since the index's inception in 1990 and bringing an end to a four-decade bull market period for bonds, according to the agency.

At the same time, bonds and stocks are falling simultaneously: the Bloomberg Bond Index is down 16% in 2022, while the MSCI Stock Index is down 19%. The simultaneous collapse of fixed-income assets and stocks is undermining the fundamentals of investment strategies developed over the past 40 years or more.

These events have already led to a 15% decline in the classic 60/40 portfolio, where investments are allocated in appropriate proportions between stocks and bonds, which was the worst annual performance since 2008.