Chart of the week - Historic selloffs present opportunity within fixed income

05.27.21

Chart of the Week – Historic selloffs present opportunity within fixed income

Since its inception, the Bloomberg Barclays US Aggregate Index has had a negative total return in only three out of 45 years. In the year following each of these selloffs, the index returned an average of 12%.

In 2021, with rates rising and the average coupon across the Bloomberg Barclays US Aggregate Index continuing to fall, returns have been negative so far, prompting investors to question how to position their fixed income assets within a balanced portfolio.

Despite all the criticism of 60/40 portfolios, the decline in fixed income prices this year has occurred for good reasons – asset classes are behaving as they should with risk allocations drastically higher and the anchor allocations modestly lower as the economy revives. We believe it is critical to acknowledge this and to plan for how to allocate assets moving forward to take advantage of price movements.

Bloomberg Barclays US Aggregate Index annual returns

Chart source: Morningstar Direct. Performance for 2021 is through April 30, 2021.
Past performance does not guarantee future results.
Investing involves risk, including the possible loss of principal.

What this means for investors

High-quality fixed income allocations have shown strong resiliency through the years and are a time-tested diversification tool for an overall portfolio. While rising rates are a risk for investors, they also present an opportunity to rebalance with lower bond prices. An active fixed income manager that can invest strategically in this US investment grade core and beyond can help further mitigate interest rate risk and generate income in a quickly changing market where agility is key.


[1662281]

Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Nothing presented should be construed as a recommendation to purchase or sell any security or follow any investment technique or strategy.

The views expressed represent the investment team’s assessment of the market environment as of April 30, 2021, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject change without notice.

The Bloomberg Barclays US Aggregate Index is a broad composite that tracks the investment grade US bond market.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Charts shown throughout are for illustrative purposes only and not meant to predict actual results.

Chart is for illustrative purposes and is not representative of the performance of any specific investment.

Macquarie Investment Management (MIM) is the marketing name for certain companies comprising the asset management division of Macquarie Group. Investment products and advisory services are distributed and offered by and referred through affiliates which include Delaware Distributors, L.P., a registered broker/ dealer and member of the Financial Industry Regulatory Authority (FINRA) and Macquarie Investment Management Business Trust (MIMBT), a Securities and Exchange Commission (SEC)-registered investment advisor. Investment advisory services are provided by a series of MIMBT. Macquarie Group refers to Macquarie Group Limited and its subsidiaries and affiliates worldwide. Delaware Funds by Macquarie refers to certain investment solutions that MIM distributes, offers, refers, or advises.

Other than Macquarie Bank Limited (MBL), none of the entities noted are authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise.

© 2021 Macquarie Management Holdings, Inc.