In the years since the global financial crisis, fixed-income investing has been much maligned. Pundits have asserted that bonds are “return-free risks,” that “the 30-year bond bull market is over,” and that interest rates, the kryptonite for bonds, have nowhere to go but up. Meanwhile, turbocharged equity-market returns may have left less-experienced investors wondering why they would ever own anything other than stocks in a portfolio.
Morningstar’s family of multi-asset indexes illustrates the point. The five indexes, whose asset allocations are determined by Morningstar Investment Management, are diversified across asset class—stocks, bonds, commodities, and real estate—and offer a range of exposure across the risk spectrum. (These indexes serve as the benchmarks for Morningstar’s allocation fund categories.) Their 10-year returns through 2018 tell the story of a bull market for stocks (Exhibit 1).