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What To Do When Bonds Fall Short

Astoria wrote an article on discussing the poor performance of bond funds this year.

Astoria has long warned about the challenges that bonds face in an environment where valuations are expensive (i.e. there's no margin of safety), U.S. rates are rising, and U.S. inflation is trending higher.

Astoria argued that 2018 would be quite different from 2017. Astoria presented at a Bloomberg Best Ideas Conference in Dec 2017 (click here) and went on Bloomberg TV in Dec 2017 (click here) arguing that investors needed to hedge their risk assets in 2018. That was our motto for this year and we continue to believe that is the right strategy.

Thus far in 2018, most multi-asset investors will likely be disappointed if they relied solely on bonds to hedge their equity risk. When you factor in a traditional model portfolio (60% stocks/40% bonds) and adjust for the volatility of bonds, 2018 has been a tough for investors that weren’t properly diversified.

To read our op-ed article, please click here.

Best, John Davi

Founder & CIO of Astoria

For full disclosure, please refer to our website:


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