Stocks and Bonds Are Falling in Lockstep at Pace Unseen in Decades

Bonds have long been viewed as a hedge against expected swings in stocks. That hedge has evaporated this year.

An inversion of the U.S. Treasury yield curve has been seen as a recession warning sign for decades, and it looks like it’s about to light up again. WSJ’s Dion Rabouin explains why an inverted yield curve can be so reliable in predicting recession and why market watchers are talking about it now. Illustration: Ryan Trefes

Gunjan Banerji

Updated May 3, 2022 4:47 pm ET

Stocks and bonds are falling in tandem at a pace not seen in decades, leaving investors with few places to hide from the market volatility.

Through Monday, the S&P 500 was down 13% for 2022 and the Bloomberg U.S. Aggregate bond index—largely U.S. Treasurys, highly rated corporate bonds and mortgage-backed securities—was off 10%. That puts them on track for their biggest simultaneous drop in Dow Jones Market Data going back to 1976. The only other time both indexes dropped for the year was in 1994, when the bond index declined 2.9% and the S&P 500 fell 1.5%.