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A Long-Term View of Bond Performance
Bonds have performed steadily over time
Despite global events, bond returns have been relatively stable over the past 40 years.
Hover over the blue line to see how certain world events–from the 1980s Savings and Loan Crisis to last year’s Brexit–have affected bond performance.
Hypothetical growth of a $10,000 bond investment, 1977–2016
- Source: Morningstar, as of 12/31/16. Bonds are represented by the Bloomberg Barclays (BBgBarc) U.S. Aggregate Bond Index. Hypothetical growth of $10,000 includes changes in share price and reinvestment of dividends and capital gains. Past performance is no guarantee of future results. It is not possible to invest directly in an index. All market indices are unmanaged. Not intended to represent the performance of any Fidelity fund.
How Do Bonds Perform When Stocks Fall?
Bonds tend to stabilize portfolio returns when stocks fall
Historically, when stocks have declined, high-quality bonds have performed well–and have typically provided steady income.
Diversifying a portfolio with high-quality bonds helps adjust credit and interest rate risk levels, which may enhance total return potential.
Calendar year total returns in years when stocks were down, 1926–2016
- Source: Morningstar EnCorr, and Fidelity Asset Allocation Research Team (AART), as of 12/31/16.
- Investment-grade bond returns are represented by the Bloomberg Barclays (BBgBarc) U.S. Aggregate Bond Index from January 1976 and by a composite of the IA SBBI U.S. Intermediate-Term Government Bond Index (67%) and the IA SBBI U.S. Long-Term Corporate Bond Index (33%) from January 1926 through December 1975. Stock returns are represented by the performance of the S&P 500 Index.
- Past performance is no guarantee of future results. It is not possible to invest directly in an index. All market indices are unmanaged. Not intended to represent the performance of any Fidelity fund.
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- In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation, credit, and default risks for both issuers and counterparties. (Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible.) Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds.
- Diversification does not ensure a profit or guarantee against loss.
- Fixed income assets under management source: Fidelity Investments, as of 6/30/20. Data is unaudited. Fidelity fixed income assets include investment-grade and high income products, bond subportfolios of multi-asset class strategies, and money market cash management vehicles. Fidelity fixed income assets under management include accounts managed by FIAM and its affiliates, not all of which may be part of the FIAM firm for GIPS purposes.
- Morningstar’s 2016 U.S. Fixed-Income Manager of the Year award went to Ford O’Neil and the team that manages the Fidelity Total Bond Fund: Matthew Conti, Jeffrey Moore, CFA, and Michael Foggin. Established in 1988, the Morningstar Fund Manager of the Year award recognizes portfolio managers who demonstrate excellent investment skill and the courage to differ from the consensus to benefit investors. To qualify for the award, managers’ funds must have not only posted impressive returns for the year, but the managers also must have a record of delivering outstanding long-term risk-adjusted performance and of aligning their interests with shareholders’. Nominated funds must be Morningstar Medalists–a fund that has garnered a Morningstar Analyst Rating™ of Gold, Silver, or Bronze. The Fund Manager of the Year award winners are chosen based on research and in-depth qualitative evaluation by Morningstar’s Manager Research Group. Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar’s Manager Research Group’s current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst Ratings are not guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness. The Morningstar Analyst Rating is a subjective, forward-looking evaluation that considers a combination of qualitative and quantitative factors to rate funds on five key pillars: process, performance, people, parent, and price. Gold is the highest of four Analyst Rating categories. For the full rating methodology, go to Corporate.Morningstar.com/us/documents/MethodologyDocuments/AnalystRatingforFundsMethodology.pdf.
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- Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based, market value-weighted benchmark that measures the performance of the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. Sectors in the index include Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS. IA SBBI U.S. Long-Term Corporate Bond Index is a custom index designed to measure the performance of long-term U.S. corporate bonds. IA SBBI U.S. Intermediate-Term Government Bond Index is a custom index designed to measure the performance of intermediate-term U.S. government bonds. Standard & Poor’s 500 Index (S&P 500) is a market capitalization-weighted index of 500 widely held U.S. stocks and includes reinvestment of dividends.
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