Today I received a chart from First Trust with very interesting information.

The chart shows all the quarters since 1976 where stocks and bonds declined together and then provides forward return data for the subsequent 6 months, 1 year, 3 years after each event.

I’ll share the chart below then point out a couple things I find noteworthy. Click on the chart to expand…

Noteworthy Items:

  1. Out of 185 quarters from 1976 – 2022.Q1, there are only 16 where bonds and stocks fell together, or less than 9% of the time.
  2. Out of those 16 instances, Q1 of this year was the second worst for bonds behind the 8.71% decline in 1980.Q1 and ahead of third worst 4.06% decline in 1981.Q3.
  3. Over the next six months following the 15 quarters for which we have subsequent return data, stocks were up an average of 1.3% and were positive 67% of the time. However, bonds were up an impressive average of 5.9% over the next six months and positive in 87% of the subsequent 6-month periods, or 13 out of 15 times!
  4. In the two 6-month periods where bonds were not positive, the negative returns bonds experienced are barely blips on the chart (i.e. very minor).

It just goes to show that, at least in the past, blowing out of bonds after such events like we’ve just gone through has been a costly mistake, which is why the average investor’s return tends to be so poor as they have a knack for selling (or buying) at the wrong times.

Obviously, past performance is no guarantee of future results and certainly there are elements that make today’s environment unique (as there always are), but I believe it is important to have a grasp of economic and market history to gain perspective on what’s happening now. Oftentimes we get so sucked into the day-to-day that we miss the big picture.

I found this information interesting and, quite frankly, surprising. I hope you got something valuable from it as well.

Past performance is no guarantee of future results. All investments maintain risk of loss in addition to gain.

Data from third-parties is believed to be reliable but accuracy is not guaranteed. Much of the data used to interpret the markets and forecast returns are often at odds with each other and can result in different conclusions. Many different factors impact prices including factors not mentioned here.

This is not investment advice but merely a general commentary. Individualized investment advice cannot be provided until a thorough review of your unique circumstances and financial goals is completed.

Views provided here are current only as of the moment of posting and are subject to change at any time without notification.

Print Friendly, PDF & Email