Bonds have once again taken the lead role in investment portfolios

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Changing Attitudes Toward Bonds

It's understandable that many investors of working age have reduced or eliminated bonds from their portfolios. For a long time, keeping bond allocations minimal felt like a bold move, even if it was done quietly from behind a computer screen.

The classic 60/40 portfolio—a mix of 60% stocks and 40% bonds—once seemed outdated.

After the global financial crisis, central banks slashed interest rates, making bonds less appealing. The Federal Reserve's aggressive stance against inflation during the pandemic further discouraged bond investments as yields spiked.

However, over the past year, bond investors have seen impressive gains. The 60/40 strategy may be making a comeback.

Last year, bonds delivered their strongest performance since 2020. Although this year brings new economic dynamics—from steadier US trade policies to a potentially less active Fed—investors are reconsidering bonds as a viable option.

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Expert Perspectives on Fixed Income

Nicholas Colas, co-founder of DataTrek, noted this week that the 2020s have been challenging for those invested in fixed income. Many funds with maturities over a decade have posted losses so far this decade.

Yet, Colas believes the worst is behind us. Bond yields have settled after years of volatility, establishing a new baseline that reflects more reasonable expectations for the future. He even suggests that bonds could potentially outperform stocks—a scenario once thought unlikely.

Portfolio Shifts and New Strategies

As the new year unfolds, investors and institutions are experimenting with their portfolios, adjusting allocations to assets like gold and bitcoin to keep pace with rapidly changing markets. Adapting to these shifts is becoming the norm.

Gold prices are displayed on a monitor at Witter Coins in San Francisco, October 7, 2025. For the first time, gold reached $4,000 per ounce, surging over 50% this year. (Photo Illustration by Justin Sullivan/Getty Images)

Rethinking Risk and Diversification

In a world where people can place bets on whether the US will annex parts of Greenland or Canada, the steady returns and safety of bonds may seem dull or even irrelevant.

Yet, ongoing geopolitical shifts, evolving fiscal policies, and frequent market-moving events suggest that now is a compelling time to reconsider all investment options.

The Value of Diversification

The main lesson from the renewed interest in bonds may not be to focus solely on fixed income, as some might suggest. Instead, it could be about moving away from chasing the latest winners and embracing a broader, more balanced approach to diversification.

Why Diversification Matters

Diversification may not have the excitement of a trending meme stock or the allure of the latest AI investment, but it has proven its worth over time. It’s especially valuable when markets turn volatile. The modern approach to diversification might even include a small allocation to bitcoin and gold, depending on your risk tolerance.

Eventually, these diversified holdings could serve as protective hedges, rather than just vehicles for chasing outsized gains.

As Colas puts it: "If and when the economy slows or enters a recession, we expect yields to fall. At that point, bonds will once again prove their value."