Close this search box.

Do Bonds Really Offset the Stock Market’s Declines?


A common investor assumption is that bonds tend to go up in value when the stock market is sliding. That’s been true during the bond market’s long rally, and makes fixed income a common choice to diversify an equity portfolio.

However, there are two problems with that assumption. One, with today’s low yields on Treasuries and other bonds, the potential for fixed income to rally as stocks tumble appears limited. 

And two, what you may not know is that the bond market’s historical diversification benefit has been limited to large stock market declines. Horizon Investments’ research indicates that bonds don’t diversify equities until the S&P 500’s losses are 15% or more. And that’s true whether looking at Treasuries, corporate bonds or investment-grade debt.

Using bonds to offset run-of-the-mill declines for stocks is often, historically, little better than holding cash.

For goals-based financial planning in a low-yield world, Horizon Investments’ currently prefers active fixed-income management and bond-like alternatives to offset stock market volatility and provide income. For investors in the preservation phase, we offer the Risk Assist® strategy, designed to protect wealth during market downturns.


Further reading:
If Inflation Returns, Bond’s Diversification Power May Disappear
Essentially Nothing. That’s How Much Bonds May Return Over Next Five Years
High & Mighty Stocks; Feeling Inflationary?; Game Stopped: Market Notes
Bond Market Bears Growling as 10-Yr Yield Tops 1%
It’s Getting Harder to Fund Retirement Using Bonds
7.9 Trillion Reasons Not to Fight the Fed, ECB, BOJ or BOE
The Stock Market Is Strange, But Not Broken by GameStop: Market Notes
In Current Markets, Only Two Words Matter: Stimulus Spending


This commentary is written by Horizon Investments’ asset management team. For additional commentary and media interviews, please reach out to Chief Investment Officer Scott Ladner at 704-919-3602 or


To download a copy of this commentary, click the button below.

Download The Big Number

To discuss how we can empower you please contact us at 866.371.2399 ext. 202 or

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. Index information is intended to be indicative of broad market conditions. The performance of an unmanaged index is not indicative of the performance of any particular investment. It is not possible to invest directly in an index.
Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent.
Other disclosure information is available at
Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC
©2021 Horizon Investments LLC
You are now leaving this website to go to