Both stocks and bonds declined globally in June, marking the first time since November 2011 that U.S. and foreign stocks and bonds all lost money during the course of a month. In short periods of time, diversification does not always work. However, over longer periods of time it does. Of the 415 rolling 12-month periods since 1978, there was only one in which all four asset classes—domestic stocks, foreign stocks, domestic bonds and foreign bonds—lost money.
The losses in June were the result of rising interest rates, as the 10-year Treasury yield, which is the benchmark yield for the bond market, continued its rise from 1.6% on May 2 to 2.5% on June 30. Bond prices move inversely to interest rates, which is why bonds fell again in June after declining in May…
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