Bonds: historical losses were reached in 2022, so what’s the outlook for 2023? (From the desk of David Richmond, Chairman & Co-Owner)


Did you think that bonds were a relatively fool-proof investment – one that you just put in your portfolio for a conservative option because you knew even if it lost, it wouldn’t be much?

Well, 2022 proved those who held that sentiment very wrong. Global bonds were down a whopping 16.4% in 2022. Before last year, many believed that losses of this magnitude were nothing short of impossible!

Just take a look at this graph from Bloomberg and Bianco Research to visualize just how historical of an event this was!

Bianco Research, Bloomberg. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. Past performance is not indicative of future results.

So besides 2022 being a doozy for bonds, what else did I take from this chart?

I feel that the likelihood that the bond market has a back-to-back worst year ever is pretty unlikely. This makes logical sense, as we’ve been told the Fed won’t take rates up the same amount in 2023 as they did in 2022.

So downward pressure on pricing, while still there early in 2023, should be much smaller overall in impact. Therefore, the rate of any remaining interest rate increase should be much more manageable.

In addition, the higher dividend and interest rate should be there all year, so this should help total returns as well.

If you have bonds in your portfolio and have further questions, we are here to help guide you. Are you invested in a way to help you reach YOUR overall personal goals? Do you have a concrete plan of action you are confident about (even though the markets have been rocky)? Reach out to us today to discuss a zero-obligation, non-biased review of your portfolio.

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