Bonds historically provided consistent positive performance after Fed pauses
Long-term investors deciding where to allocate capital now may want to consider bonds for upside returns.
Bonds Deliver Strong Returns After Yield Curve Inversions
- A historically fast Federal Reserve tightening cycle has steeply inverted the yield curve, with the 2-to-10-year inversion occurring only 7% of the time after 1982.
- Bonds have typically provided strong returns after these inversions, with longdated bonds outperforming short-dated bonds.
Sources: Morningstar, Bloomberg, S&P, PGIM Investments. Short-Term Bond, Intermediate Core Bond, and Intermediate Core-Plus Bond are represented by Morningstar mutual fund category averages. Returns over one year are annualized. S&P 500 Index is an unmanaged index of 500 common stocks of large U.S. companies, weighted by market capitalization. An investment cannot be made directly in an index. Performance represents average returns following any period the U.S. Treasury yield curve was inverted using monthly data from 1982 to 2021. The yield curve inverted 31 times during this period. Category and index returns calculated by PGIM Investments using data from Morningstar. Past performance does not guarantee future results.
See Other Spotlights
SPOTLIGHT | On the Markets
Data illustrating current market conditions and trends—and what they mean for investors
Growth Stocks Shine When Aggregate Earnings Growth Dims
Growth stocks are likely to outperform value stocks as growth becomes scarce with broader earnings growth retreating to below-trend levels.
Ultra short bonds may help investors benefit from rising rates
Investors not ready to fully reinvest in equity and bond markets may be able to hedge market volatility and interest rate risk while earning better yields.
Robust Stock Rallies Tend to Follow Bearish Consumer Sentiment
Historical trends suggest that depressed consumer confidence could signal strong upside potential for equity investors.
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