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Chart of the week

Flat returns for core fixed income over five years

The Agg’s returns are flat since April 2019. Persistent inflation amid firm growth provides a challenging outlook for core fixed income.

April 26, 2024

Bloomberg U.S. Aggregate Index total return

Line chart showing the Agg generated a flat return since April 2019 as it was whipsawed by a volatile rate environment. Recent inflation data could portend further challenges.

Source: Bloomberg Finance, L.P., as of April 24, 2024.

  • The traditional 60/40 portfolio has generated a solid 14.3% return over the past year.1 Looking underneath the hood, however, reveals “the 40” is not pulling its weight.
  • The Bloomberg U.S. Aggregate Index, the 40 within the 60/40 portfolio, has been stuck in neutral over the last year, returning -0.9%.1 In fact, over the last five years, the Agg has been exactly flat (-0.09%).1
  • As the chart highlights, the Agg benefited greatly from the zero-interest rate policy that prevailed throughout 2020 and 2021 but quickly gave back those returns and then some as the Fed began its aggressive rate hike cycle in 2022.
  • Thursday’s release of Q1 GDP and inflation data gave markets a fresh reminder of the challenges the Federal Reserve faces in its quest to bring inflation further closer to its 2% target. Shortly following the report, the 2-year and 10-year Treasury yields climbed to their highest levels since November 2023.1
  • The prospect of falling growth and persistent inflation may continue to challenge the performance of a 60/40 portfolio and, in turn, drive investor demand for alternative sources of income, growth and diversification.

  • Bloomberg Finance, L.P., as of April 24, 2024. 60 refers to the S&P 500. 40 refers to the Bloomberg U.S. Aggregate Index.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

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