I thought this was a good update - "May we live in interesting times!"
Then and Now: An Update on Today’s Bond Market
"Think back to this time last year. Inflation was soaring to a 40-year high of 9.1%. The Federal Reserve (Fed) had just made its third-consecutive rate hike, raising the federal funds rate by 0.75% for the first time in more than 25 years. The S&P 500® Index was down just shy of 20% — the index’s worst 6-month start to a year since 1970.
At the same time, the U.S. bond market, measured by the Bloomberg U.S. Aggregate Bond Index, was down more than 10%. Calls for an impending recession were a dime a dozen. Put simply, these were tough times for many investors’ portfolios.
Oh, how times have changed.
The market and economic statistics in Figure 1 help paint the picture. The stock and bond markets have turned around. Inflation has cooled. Some inflation measures using 12-month averages may even overstate current inflation given the rate of price increases have been coming down recently. An estimate of annualized inflation based on the most recent quarter from the Federal Reserve Bank of Cleveland puts current Consumer Price Index (CPI) at 3%, nearing the Fed’s 2% target. Economic growth also appears strong. And while the Fed has been clear that more rate hikes may come this year, there are many signs that the period of rising rates, or at least significantly rising rates, may be ending.
So, what are bond investors to make of this? We offer a few considerations for allocating to bonds in today’s market.