Bonds Are Boring Again. But Political Turmoil Could Change That.

Bonds have begun to recede into the background, where they belong. As steady earners, they don’t even try to compete with stocks, the prima donnas of the investing world.

The first half of the year was mediocre for bonds, but that counted as a colossal improvement. All too frequently in the last three years, bonds demanded attention for the worst of reasons.

Now, though, with the annual inflation rate falling, the fundamental outlook for the rest of 2024 and beyond is more positive for bonds than it has been in some time. If you’ve got cash sitting in a money market fund earning 5 percent a year in interest or more, you may want to start planning ahead because those lovely short-term interest rates could start to decline fairly soon — while bond returns would receive a hefty bonus.

But with mounting uncertainty about the country’s political future since the Trump-Biden debate, there are already signs that navigating the bond market will be tricky. Here are some important factors to consider, and some ways to handle them.

The Bad Times

First, some investing essentials.

Stocks are risky. I’ve always known that, and I’m prepared to take periodic losses with them, in the expectation of receiving excellent long-term returns. But bonds? They’re supposed to be safe — a balm when the stock market inflicts pain.

They’ve been anything but soothing over the last several years. The market has been so bad that I’ve sometimes wondered whether it’s worth holding bonds at all. Just look at the numbers.