How to Invest When Both Stocks and Bonds Are Falling

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We hear a lot about how our investment portfolios should have both stocks and bonds — because they typically move opposite to each another.

The theory is that when stocks go down, bonds should protect your principal. The problem? Every once in a great while, stocks and bonds both tank. For example, this year, 2022.

As of today, the S&P 500 is down about 15% since the start of the year. At the same time, rising rates have crushed bonds, with some down 20% or more.

So, what the heck are you supposed to do when there’s nowhere to run, nowhere to hide? Let’s find out.

Stacy Johnson and I are joined by producer and novice investor Aaron Freeman to talk about what’s going on in the stock and bond markets, what’s ahead and what you should be doing.

This week’s special guest is David Stein, a former institutional fund manager and the founder of Money for the Rest of Us.

Remember, even though we sometimes talk about specific investments on this show, don’t take them as recommendations because they’re not. Before investing in anything, do your research and make your own decisions.

You can watch this episode below, or if you’d prefer to listen, you can do that with the player at the top of this article. Or, you can download the episode wherever you get your podcasts:

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What is going on with the stock and bond markets?

Right now, things are a little crazy in the market. Even though stocks and bonds usually move inversely to each other, these days they’re both heading in the same direction — down. We take a look at why this is happening and what you can do about it.

• Find out more about how stocks and bonds generally work together.
• Learn more about what’s going on with the bond market and why the pain might be coming to an end.
• How does inflation impact stocks? Get a primer on what to expect.
• We discuss the commodities super cycle. But what is it, and what can you expect? Our guest David addresses the commodities market and how to handle it on this episode of his podcast.
• David also gives his take on predicting recessions. Check out our recent podcast episode on how to prepare for a recession.

How to invest when the stock market is down

A down stock market doesn’t mean you have to bow out. Our show’s panelists share different strategies for investing when the stock market (and bond market) are down.

• Stacy offers a special look at what to do with your portfolio when things are scary.
• Hoping to avoid investing in stocks right now? Here are some ways you can invest without relying on stocks.
• Do you want to invest in bonds? Check out this comprehensive bond investing guide from our guest, David Stein.
• What about crypto? Sorry, crypto bros. It looks like cryptocurrencies are pretty correlated to the stock market.
• The Wall Street Journal also has some ideas for investing when stocks and bonds are falling.

ETFs mentioned by this week’s guest

While we don’t recommend investments, you might be interested in researching the exchange-traded funds (ETFs) mentioned by our guest. Here are the ticker symbols:

• DFJ: Small-cap dividend growth
• VTI: Total stock market
• INFL: Inflation beneficiaries
• VYM: High dividend yield
• IVLU: International mid-cap and large-cap
• PFIX: Interest rate hedge

Before investing, do your due diligence and make sure the investment is appropriate for your risk tolerance and portfolio strategy.

Meet this week’s guest, David Stein

David Stein is the founder of the Money for the Rest of Us investment education platform. Since 2014, he has hosted the Money for the Rest of Us investing podcast and led the Money for the Rest of Us Plus membership community.

David’s podcast reaches more than 40,000 listeners per episode and has close to 20 million downloads. He is the author of “Money for the Rest of Us: 10 Questions to Master Successful Investing,” which was published by McGraw Hill.

Previously, David was an institutional investment adviser and asset manager. He was a managing partner at Fund Evaluation Group LLC, a $19 billion investment advisory firm. At FEG, David served as chief investment strategist and chief portfolio strategist.

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About the hosts

Stacy Johnson founded Money Talks News in 1991. He’s a CPA, and has also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Miranda Marquit, MBA, is a financial expert, writer and speaker. She’s been covering personal finance and investing topics for almost 20 years. When not writing and podcasting, she enjoys travel, reading and the outdoors.