Rare double worms hit investors: plunge in both stocks and bonds

ryanniesMay 19, 2022

Reuters

David Randall and John McCrank

New York — From mee stock enthusiasts to retirees, this year’s stock and US Treasury price spikes enjoyed wealth growth during the historic recovery of the early financial assets of the 2020 Corona Virus Pandemic. It overturned the portfolio of individual investors.

The brutal fall on Wall Street followed Wednesday, the worst day loss of the S & P 500 since June 2020. The Benchmark Index is now down 17.5% from its peak at the beginning of the year, with a market capitalization of $ 499 billion. At one point, S & P fell nearly 20%, trying to confirm the bear market.

Unlike many market sales in the past, this recession has pushed down the prices of US Treasuries and pushed up yields. This is because the Federal Reserve has begun to reverse the easy financial policies that underpinned the economy during the pandemic blockade.

More pessimistic retailers have sold $ 87 million in stock online in the past week to Tuesday, with an average annual net buy of $ 3.3 billion, according to JP Morgan’s note. bottom.

The Treasury has generally been considered one of the safest investments in the world. But so far in 2022, the ICE BofA US Treasury Index has fallen 9.3%, the worst start of the year for the Treasury since 1830, according to Deutsche Bank. This blamed investors who relied on the bond market for income and as a buffer against potential stock market losses.

“Most investors have never seen such a market environment,” said Christine Benz, Morningstar’s personal finance director. “It can get worse before it gets better, and it will really test investor patience.”

During the pandemic, many surges and tech stocks soared, and their sharp declines are hoping for a spectacular rally as seen earlier last year on GameStop and other so-called memetic stocks. Ragged investors who bet on.

“I’m seeing the same things that others have seen that started 18 to 24 months ago. For example,” Oh, see all the greens, go up, go up, go up. And suddenly, 29-year-old Alex Rutfield, an engineer on the outskirts of Boston, who has invested more than $ 50,000 in stocks and ETFs, including Internet and robotics companies, said: He said the value of his portfolio returned almost evenly.

Double Wami

Double selling of equities and bonds is especially difficult for individual investors who rely on a combination of equities and bonds to slow down the decline in their portfolio, and equities rise ideally in economic optimism. Bonds were strengthened during times of turbulence.

If stocks and bonds match, the strategy will not work. The BlackRock 60/40 Target Allocation Fund follows the standard portfolio approach of holding 60% of its assets in equities and 40% in bonds to limit risk, declining by nearly 12% since the beginning of the year. The worst performance. It was released in 2006.

According to Vanda Research data, the majority of both equity and fixed income sales come from wealthy and older investors who are reducing their overall risk exposure primarily through the sale of investment trusts.

Bruce Bagley, 69, founder of Santa Rosa Uniforms & Career Apparel in Santa Rosa, California, has so far taken courses in a portfolio with 55% equity, 40% fixed income and the rest in cash. I said it was being held. His REIT investment is declining.

“Where else are you going to put your money?” He said.

Investors who invest heavily in bonds, which make up about 20% of their severance pay on average, cancel their vacation plans, eat more often, and rethink support for other families, according to Morningstar. That’s what the wealthy Melanie Nichols said. Advisor to WA Asset Management in Birmingham, Alabama.

“It’s scary to see that there is part of a portfolio that provides all the income and now it’s down 10%,” she said. “People aren’t used to these returns because they aren’t very common in the bond market.”

Other retirees are looking for other sources of income to rebuild their nest eggs.

One of the 73-year-old former marketing executives living in the suburbs of Cleveland holds about 30% of his portfolio in bonds and says, “I think it’s enough to live for years and whether it’s coming back. I don’t know. ” She was considering finding a part-time job to maintain her retirement savings.

John Kanison, Baker Boyer’s Chief Investment Officer in Walla Walla, Washington, said: (Report by David Randall and John McCrank, edited by Ira Iosebashvili, Megan Davies, David Gregorio)