The 10 Year US Treasury Bond is on track for its worst year ever. It’s down -16.7%.

Yes, you read that right.

The safest Treasury Bond in the world is down -16.7% this year.

Isn’t Safety a Myth then?

Well, it is and more importantly an amazing sales pitch (but that’s the subject for some other time).

This is not the first-time government bonds have gone down. They are exposed to something called interest rate risk, but this again is a subject for another day.

What is the headline about then?

I am coming to that important point.

According to Charlie Bilello – Stocks and Bonds falling together, while rare, has happened before (1931, 1941, 1969 and 2018). But if the year ended today (30^th September 2022), this is the first time in history that both stocks (US S&P 500) and bonds (10 Year US Treasury) are down more than – 15% in a calendar year.

However, this data needs to be looked at in the right context. The US stock market has had a phenomenal run since March 2009. Even today (despite a -23.9% correction), the 10-year US S&P 500 return is 11.91% p.a.

More importantly, while government bonds are generally considered safe, they cannot be the core engine that powers your portfolio in a low return high ‘lifestyle inflation’ world.  Because, safety is not about return of your capital, but it is about protection of your purchasing power.

Most importantly, all of this is largely irrelevant to a planning driven goal focused investor with a well- diversified portfolio that is capable of not only beating lifestyle inflation but also weathering such storms.