• Accordingly, it’s not surprising that investors are thinking about the risk of meaningfully higher interest rates and, as a result, falling bond prices. 
  • We believe core, investment-grade bonds have a role in a diversified portfolio regardless of market conditions.

Pent-up demand from households and businesses, bolstered by historic levels of fiscal and monetary accommodation, should make for a historically robust economic recovery in the coming quarters as the global economy continues to recover from COVID-19. This could push bond yields meaningfully higher. Because bond prices move inversely to yields, some fixed-income investors are understandably concerned about the possibility of falling bond prices. While seeing a price decline can be disconcerting, we believe investment-grade bonds should continue to provide important diversification benefits for investment portfolios and positive returns over both intermediate and longer time horizons (even in the unlikely case of a longstanding move to significantly higher bond yields).

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Index Definitions

Bloomberg Barclays US Aggregate Bond Index measures the return of the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice and is intended for educational purposes only.

There are risks involved with investing, including possible loss of principal. Diversification may not protect against market risk.

Information provided by SEI Investments Management Corporation, a wholly-owned subsidiary of SEI Investments Company.