Investors should maintain high-quality bonds and diversify across style boxes for stability

From Morningstar: 2025-05-13 04:28:00

During recent market volatility, US treasury yields have unexpectedly risen instead of falling, potentially due to concerns about inflation and US policy. Investors should maintain high-quality bonds in their portfolio for stability. Lower-quality bonds have behaved more like stocks, emphasizing the need for diversification with cash and high-quality fixed-income investments. The recent market rout highlights the importance of valuation, with growth stocks experiencing the most significant losses. Diversifying across style boxes can help mitigate risk. Non-US stocks have outperformed, providing diversification benefits to US investors, with a potential currency effect adding to gains. Gold has performed well in 2025 but is volatile, so investors should maintain a small position in their portfolio and dollar-cost average into it.



Read more at Morningstar: 5 Key Investing Lessons From Recent Market Volatility