Awash with cash, stock and bond markets are behaving unpredictably in the midst of a global pandemic. US equity valuations continue to run to historic highs, while US Treasury yields still hover near generational lows despite the recent backup in rates. While the recent bond market sell-off may have eased skepticism for some market participants about the ability of bonds to protect against equity risk in the traditional 60/40 portfolio, structural questions about bond’s protective nature remain valid. We think investors can no longer rely on bonds to provide appreciable income — or even meaningful downside protection in volatile markets.

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