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.

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