Bill Gross pioneered the “total return” strategy in the 1980s that revolutionized the once-sleepy bond market.
Ray Dalio came out with a gloomy prediction for stocks and the economy after a hotter-than-expected inflation print rattled financial markets around the globe this week.
Bond bulls, while savoring a stellar rebound in returns fueled by growing recession fears, are braced for potential setbacks.
Signs of a rapidly deteriorating US economic outlook have spurred bond traders to pencil in a complete policy turnaround by the Federal Reserve in the coming year, with interest-rate cuts in the middle of 2023.
There are no shortage of bears making similar claims these days. Between the Russia-Ukraine war, the aggressive tightening by the Federal Reserve, soaring inflation and Covid lockdowns in China, there are plenty things to worry about. The S&P 500 has already lost 12% this year, while the Nasdaq Composite cratered into a bear market after sliding more than 20% from its peak in November. Key bond benchmarks are down more than 10%.
The bond market is dialing back expectations for how quickly and steeply the Federal Reserve will raise interest rates as Russia’s war in Ukraine threatens to exert a drag on global economic growth.
A bedrock of long-term investing, a portfolio split 60/40 between equities and high-quality bonds, is set for its worst monthly slide since the market meltdown in the early days of the pandemic.
Bonds aren’t working as a safe haven like they used to.