From Morningstar: 2025-04-24 04:25:00

Investors have historically turned to US Treasuries as a safe haven during market turbulence, expecting bond prices to rise when stocks fall. However, recent tariff announcements caused Treasury bond yields to spike, leading to price drops. Despite this, bonds have still outperformed stocks during periods of market uncertainty.

Prior to the tariff announcements, ten-year Treasury bond yields were at 4%. After the news, yields rose to 4.5%, causing prices to fall. Market experts attribute this to global investor unease over US trade policy and fears of inflation due to tariffs.

Despite recent volatility, Treasury bonds have fared better than stocks during turbulent times. While bonds have seen losses, they have been less severe than stock market declines. Additionally, bonds have actually posted gains since market volatility began in late February 2025, providing a buffer against losses with higher yields.

Investors should hold cash reserves for liquidity, diversify bond holdings with various maturities, and monitor interest-rate sensitivity and credit quality. Individual bonds or defined-maturity funds can help meet specific obligations without being affected by short-term market fluctuations. Calibrating bond allocations based on spending horizon can also help manage risk. Cryptocurrencies may have a place in a diversified portfolio, but their volatility makes them more similar to stocks than bonds. The author does not own any of the securities mentioned in the article. Morningstar’s editorial policies can be found on their website.



Read more at Morningstar: Are US Bonds Broken as Diversifiers for Stocks?