What if you could turn $1 million today into over $5 million thirty years from now with virtually no counterparty risk?
That’s roughly the math on areas of the bond market right now, and the investment is a 30-year zero-coupon Treasury (otherwise known as a STRIPS) which recently started trading for less than 20 cents on the dollar1. Granted, your taking pretty sizable interest rate and inflation risk to get there, but on a nominal basis you will get there (so long as the U.S. government doesn’t default on that debt).
As we all know, interest rates are inversely correlated with bond prices, and Treasury rates across the yield curve have been on the rise in 2026. From the war in Iran driving up energy prices to a more hawkish than expected Fed chair, coupled with fears over a mounting federal deficit, growing competition for capital and AI-related debt issuance crowding out government bond demand, it’s no wonder that rates are under pressure.
There’s a lot going against the bond market at the moment… and therein lies the opportunity.
But how bad have things been for fixed income? Turns out historically bad:
Based on the chart above from Bianco Research, the most recent 10 year period has been the worst stretch for the US bond market in, well, US history. Bouncing off a post-pandemic, zero interest rate environment with the sharpest rise in interest rates in four decades will do that.
Sticking with the past, keep in mind how much of an anomaly 2022 was regarding how bonds have historically performed relative to stocks:
Source: FactSet, Strategas, J.P. Morgan Asset Management. Data are as of October 6, 2026.
Over the last hundred years, there have been 25 calendar years with negative returns for the US stock market (notice that six of those years were in the 1930s), and when that has happened bonds have generated a positive return 84% of the time. One of those landmark stretches was the tech bubble bursting from 2000-02, when fixed income outperformed the S&P 500 by over 70%:
Source: Triad Wealth Partners, YCharts
Furthermore, fixed income is now actually paying a real… income. And that yield acts as a shock absorber against interest rates rising further from the present:
Source: Bloomberg, FactSet, Federal Reserve Bank of Cleveland, Standard & Poor's, U.S. Treasury, J.P. Morgan Asset Management. Data are as of October 6, 2026.
The chart above from JPMorgan illustrates the estimated total return of various sectors of the bond market. If rates stayed unchanged over the next year, the total return for each sector would be the current yield (light blue bars). Using the Bloomberg U.S. Aggregate index as an example, that means you could expect a 5.5% return the way things sit today. If over the next year interest rates were to rise equally across the yield curve by 100 bps, that same bond market index would be expected to suffer a 0.3% loss. Not good, but not that bad either.
Now, what if interest rates decrease by 100 bps over the next year? Total return expectations jumps to over 11% as the price of those bonds increase while investors continue receiving their coupon payments.
This is “how I have learned to stop worrying and love the bond”, because one of their defining traits (dare I say features) is that your future returns can be largely predicted by just one variable: the current yield.
The chart below, also from JPMorgan, lays this out beautifully:
Source: Bloomberg, FactSet, J.P. Morgan Asset Management. Data are as of October 6, 2026.
Since 1970, when looking at 5-year forward returns on the Bloomberg U.S. Aggregate index (aka the bond market), nearly 90% of that return figure can be explained by the current yield. That’s what that R2 figure means, it’s called the coefficient of determination, and a higher number means greater predictive power. Historically, a starting yield near today’s 5.54% has been associated with five-year forward returns of around 5.71% with minimal deviation. This relationship isn’t a guarantee of course, as the 1970’s and latter 2010’s/early 2020’s showcase, but over the long-term it’s hard to argue against this as a reliable guide for estimating future returns.
Speaking of guidance, the higher yields may change the role bonds play in a diversified portfolio, which makes this an opportune time for clients and their advisors to review their allocations. A unique quirk about this particular market though, is that rising rates should (in theory) negatively impact stock market valuations, and therefore returns, as future expected cash flows are discounted by a higher rate. That hasn’t happened (yet…), as both stocks and interest rates have risen this year while market valuations have actually declined and become more attractive on a forward basis due to the tremendous earnings growth we are experiencing, particularly in the S&P 500:
In summary, bonds are having a moment, and given how well stocks have done it’s worth considering a shift towards fixed income. Not just from a risk management perspective, but also for the potential of maximizing total return.
Brent Coggins, Chief Investment Officer
Triad Wealth Partners
Indices are unmanaged, do not reflect fees or expenses, and cannot be invested in directly. Past performance is not indicative of future results. Projections and scenario analyses are hypothetical, are based on assumptions that may not occur, and are not guarantees. Opinions expressed are those of the author as of the date of publication and are subject to change without notice. Information from third-party sources is believed reliable but is not guaranteed. Fixed income investments are subject to interest rate, inflation, credit, and liquidity risk; bond prices generally fall when interest rates rise, and longer-maturity bonds are more sensitive. Zero-coupon securities may generate taxable income each year before any payment is received. Consult a tax professional regarding your situation.
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