A savings mix of stocks and bonds has helped offset losses in previous years—but not this one
By Akane Otani and Karen Langley
Susan Hodges and Kirsten Haake pulled their money out of the markets in May, but have since put some money back into stocks.
For decades, Americans planning for retirement have been advised to invest in a mixture of stocks and bonds. The idea was simple. When stocks did well, their portfolios did, too. And when stocks had a bad year, bonds usually did better, which helped offset those losses. It was one of the most basic, dependable ways of investing, used by millions of Americans. This year it stopped working.
Despite a powerful rally last week after cooler-than-expected inflation data, the S&P 500 is down in 2022 about 15%, including dividends, while bonds are in their first bear market in decades. A portfolio with 60% of its money invested in U.S. stocks and 40% invested in the 10-year U.S. Treasury note has lost 15% this year. That puts the 60-40 investment mix on track for its worst year since 1937, according to an analysis by investment research and asset management firm Leuthold Group.
Many Americans are seeing decades’ worth of savings shrink, week by week. Belt-tightening among millions of households could serve as yet another drag on an economy already suffering from high inflation, a slowing housing market and rapidly rising interest rates.
Eileen Pollock, a 70-year-old retiree living in Baltimore, has seen the value of her portfolio, with a roughly 60-40 mix, dip by hundreds of thousands of dollars. The former legal secretary had amassed more than a million dollars in her retirement accounts. To build her savings, she left New York to live in a less expensive city and skipped vacations for many years.
“A million dollars seems like a great deal of money, but I realized it’s not,” she said. “I saw my money was piece by large piece disappearing.”
