Quick shot: Investors should consider core bonds as a way to offset market volatility

Does anyone remember the movie “Strange World” that was released by Disney in 2022? Most would say no (myself included), since the movie lost well over $100 million dollars.

However, Disney also released “Black Panther: Wakanda Forever” in 2022, which grossed almost $900 million and “Avatar: The Way of Water” which grossed over $2 billion.

Great story, but what’s the point? Well-known companies diversify their products and services, so why shouldn’t you have diversification in your investment portfolio. The Walt Disney Company doesn’t just release one movie a year. In fact, movies are just a subcomponent of their entertainment business. They also have media and theme park and experiences, a portfolio of assets that drive their performance.

Now, this isn’t a plug for Mickey Mouse and the crew. Rather, it’s meant to illustrate the importance of diversification. For investors, we see core bonds as a way to add diversification. Bonds have historically served as a reliable buffer against periods of equity market volatility. For example, during the Global Financial Crisis, from September 2007 to December 2009, the S&P 500 was down approximately -23%, while the Bloomberg U.S. Aggregate Bond Index was up roughly 15% over that same period.

As investors wrestle with concerns of fiscal policy uncertainty and question the durability of the of U.S. expansion (which we still expect to continue), core bonds may be a reliable diversifier to help reduce portfolio drawdown and may provide investors yield above cash equivalent returns.

Past performance is no guarantee of future results. It is not possible to invest directly in an index.

All market and economic data as of 02/25/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

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