How Often Do Stocks and Bonds Decline at the Same Time?

Earlier in the year many investors were under the impression that something had to give because stocks and bonds were both rising.  I looked at the historical data on positive stock and bond returns to show that this is more common than most investors assume:

Stocks Bonds Rise Together

Since performance has been so strong in both stocks and bonds during this cycle, the chorus continues to grow for lower returns going forward for both, something that’s not out of the realm of possibilities. This brings up the question about how often stocks and bonds decline at the same time to prepare for the possibility.

It’s actually extremely rare on an annual basis historically when looking at the S&P 500 and 10 year treasuries from 1928 to 2013:

Down yrs stocks bonds

It’s only happened three times and the last occurrence was in 1969. That’s less than 4% of all annual periods, an impressive record.

Breaking it down a little further, when we look on a quarterly basis, stocks and bonds have fallen together more often.  Going back to 1976, using the more diversified Barclays Aggregate Bond Index, here are the 14 instances where both fell:

Down yrs stocks bonds 2

That means about 9% of all quarterly periods saw both go down together.  It’s interesting to note that since the inception of the Barclays Aggregate Index, the two have never declined during the same annual period. Hard to believe but true.

Obviously, although something is rare, doesn’t mean it can’t happen in the future. But these numbers show the benefits of utilizing different asset classes to smooth out your results.


What's been said:

Discussions found on the web
  1. Market Map commented on Sep 14

    Bonds also fell with stocks in the 2 weeks leading up to Oct 16th 1987, but not for the quarter

  2. Paul Movell commented on Sep 15

    Does any other asset class have a record that’s even close?

    • Ben commented on Sep 16

      Nothing I could find. Other asset, such as commodities, might have lower correlations, but nothing like this as far as the down years.

      • Paul Novell commented on Sep 17

        That’s what I thought and confirms my own research. Thanks. Paul.

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  6. Linford Herschberger commented on Oct 04

    What source do you use to look up the “10 year treasuries” history? I always use Yahoo Finance but all I could find there was the 30 year treasury and the 5 year treasury.

  7. Shane commented on Jan 15

    This is one of the few places I see that discuss this phenomena. I’ll echo the chorus who have already asked this? So what’s the tertiary hedge for those rare 1969 scenarios? Gold?

    • Shane commented on Jan 15

      Looking at historical gold prices for those down years I see that’s probably a no. Went up in 69 but not much. Other ones down or even…

      • Ben commented on Jan 15

        Gold actually didn’t become uppegged for another couple of years so it’s tough to say. My guess is that a diversified basket of commodities would do OK, but it would definitely be interesting to see how investors would react to this situation. Definitely not out of the realm of possibilities. Also, I would guess foreign stock markets would have decent numbers in this scenario.

  8. Riorn Lee commented on Apr 09

    Great work and blog Ben! And what about on a daily interval? How many days since 1976 have stocks and bonds gone down together?