Bloomberg ETF Analyst: Bonds Have Recently Failed to Hedge Against Stock Declines, Inflows into Money Market Funds and Buffer ETFs Increase

Bloomberg ETF analyst Eric Balchunas stated on platform X that bonds have once again failed to hedge against stock declines. Since SPY retreated from its June highs, AGG, TLT, and LQD have all declined. Although the time window is relatively short, it is somewhat reminiscent of the situation in 2022. He noted that many people have long relied on the 40% bond allocation in a 60/40 portfolio to hedge against the 60% stock portion, which is also the reason for the substantial inflows into money market mutual funds and buffer ETFs.

He also stated that this is not to say bonds will ultimately fail to hedge against stocks, but their recent track record has been less than ideal. The Federal Reserve's long-term rate cuts once simultaneously boosted both bonds and stocks, whereas in 2022, they fell together when rates were suddenly raised. Recently, rising oil prices have sparked inflation concerns, leading to a similar situation once again.