Total Return Review – Bonds’ Slide Continues

Our Research — September 1, 2022

Markets By Gregory Blaha

The losses continued to pile up in the bond market in August.

The pain in the bond market largely continued in August, with the U.S. Aggregate Index now down almost 11% year-to-date. Since the late 1970s, no other year has come close to experiencing similar pain in the bond market.

The next chart shows these losses in a slightly different manner. The bottom panel highlights the drawdown from the previous peak. U.S. bonds are now 12.4% off their peak. With the exception of the drawdown that ended in February 1980 (when the index was only calculated monthly), this is almost twice as large as the next biggest drawdown.

On a year-to-date basis, this is again unlike anything seen before. Global bonds gave back everything they gained since the June 14 low.

In total, the drawdown in global bonds has now reached almost 20%. Since data began in 1989, this is almost twice as large as the next biggest drawdown on record.

In a recent Charts of the Week post on seasonality, we noted TIPS typically see some of their worst performance in the last four months of the year. This will not come as welcome news to those in the TIPS market, which has already seen one of its worst total return years on record. Only 2013 posted worse returns through August 31, and only barely.

To see annualized total returns for U.S. stocks and bonds, global stocks (ACWI) and ex-U.S. global stocks (ACWI ex-U.S.), see the PDF below. Each series is shown over a 3-year, 5-year, 10-year and 20-year annualized basis.

The PDF below details total returns for almost every major asset class across the globe.