15 June 2022: The Fed hikes 75 basis points
On June 15, 2022 the Federal Reserve raised interest rates by three-quarters of a percentage point, its biggest increase since 1994, after inflation hit a four-decade high. More large hikes followed. Bonds suffered one of their worst years in history, proving that safe assets can lose money when rates rise from very low levels. Stocks and bonds fell together, a painful surprise for balanced portfolios.
The lesson: Bonds are only safe if rates cooperate; starting yields set the cushion against rising rates.
What it meant for investors
$1,000 in US Treasury bonds at the start of 2020 → $929 today, vs $2,092 in the S&P 500.
We start the clock at the start of 2020, the latest year on the wheel. That is a loss of $71.43, while a plain index fund over the same years made $1,092.
What US Treasury bonds teaches: Bonds bought at very low yields carry real price risk, because the starting yield is the best guide to future bond returns.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2015 | $480 | $1,083 | $3,301 |
| 2018 | $490 | $1,061 | $2,519 |
| 2020 | $560 | $929 | $2,092 |
green = beat the S&P 500 · red = lost money
What if you bought US Treasury bonds? Every starting year and the full story →
More US Treasury bonds history
- 4 February 1994: The Fed starts the great bond massacre
- 18 March 2009: The Fed fires its bazooka
- 5 August 2011: S&P strips the US of its AAA rating
- 27 August 2020: The Fed changes how it targets inflation
- 6 October 1979: Volcker's Saturday Night Special
- 3 November 2010: The Fed launches QE2
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
Play Sixty-40