If stocks have a terrible year and Treasury bonds don’t step up, an investor with a balanced portfolio may end up losing even more money than in 2008. And if inflation fears were to pick up, bonds could actually fall as well. Investors, cushioned by a gigantic 30-year bull market in stocks and bonds, have forgotten that, in very bad situations, both stocks and bonds can crash at the same time.
It happened in the 1940s and in the 1970s. And if investors are honest, they have to accept the risk that it could happen again.