Bonds are supposed to be an asset class that counteracts the volatility of stocks, especially on the downside. Well, that did not happen in 2022 which led to the pronouncement of the death of the quintessential 60/40 portfolio. This is pre-mature. The significant drawdown of both stocks and bonds last year was due to the sudden and unprecedented Federal Reserve hike of 4.25% in interest rate in 9-months. It is highly unlikely that interest rates will go up another 4.25% in 2023. Now, with a higher yielding coupon for bonds at the same time of increasing economic uncertainty, stocks are likely to remain volatile with downside pressure. 2023 and forward for bonds will be different than the unique 2022 set of circumstances.
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