Bonds Have Been Losing for Six Years. Here Is What That Means.

Bonds are supposed to be the safe part of a portfolio. For the past seventy-one months, they have been the worst-performing major asset class in modern history.

Since August 2020, the US bond market has been in continuous drawdown — its longest and deepest decline ever recorded, with a maximum fall of 17.2% according to the Bloomberg US Aggregate Bond Index (GuruFocus, 2026). The previous record was sixteen months, with a peak decline of 9.0%. The current episode is more than four times longer. Every retirement account that followed the standard advice to balance stocks with bonds has been quietly absorbing losses on the bond side for nearly six years.

The mechanism is straightforward. When interest rates rise, bond prices fall — because existing bonds paying lower rates become worth less relative to new bonds paying more. The Fed's rate-hiking cycle that began in 2022 was the sharpest in four decades, and inflation has remained stubbornly elevated. Core PCE — the Fed's preferred measure — has moved up to 3.4%, marking the 63rd consecutive reading above the 2% target (Bilello, 2026). The 10-year Treasury yield now sits at 4.55%, the 30-year above 5% — each move pushing existing bond prices lower (Fidelity, 2026).

The stock market question almost asks itself: if bonds have been losing for seventy-one months, where has the money gone? Partly into equities. The S&P 500 has returned over 10% in the first half of 2026 — one of only nineteen such years since 1980 (Edward Jones, 2026). The relationship matters: when rates are high because the economy is strong, stocks tend to rise alongside bond pain. When rates are high because inflation is uncontrollable, both suffer. Right now the economy is still growing — the more favorable version of this scenario for equity investors.

The shift in rate expectations captures the scale of what has changed. At the start of 2026, bond markets were pricing in two Fed rate cuts. Today they are pricing in one to two rate hikes — nearly a full percentage point swing in expectations in six months (Bilello, 2026). The Fed chair's own dot plot, from which he notably withheld his own projection at his first meeting, now shows nine of eighteen officials expecting at least one hike before year end.

The seventy-one month drawdown will end. Rates eventually stabilise, bond prices recover. Higher yields now available — the 10-year at 4.55%, investment-grade corporates at meaningful spreads above — make bonds more attractively priced than at any point in the past decade. Whether that translates into returns depends on whether inflation cooperates with the Fed's stated 2% target, and whether the rate hikes the dot plot now signals are delivered, deferred, or avoided entirely.

Bonds lost for six years. They did not stop existing. They just changed what they offer — and what they demand in return.