MW The world's largest asset manager says you can't count on bonds anymore. What are retirees supposed to do now?
By Beth Pinsker
How to shift your mindset away from bonds
If you're retired and want safety in your portfolio, your best options might be changing.
When the world's largest asset manager says bonds aren't reliable anymore as a hedge against stocks, and its latest market commentary shows that tariffs, interest rates and geopolitics are triggering its biggest fears, retirees should pay attention.
BlackRock sounded this alarm in its outlook for 2026 and again this week in its latest market analysis.
"Traditional diversifiers like long-term Treasurys do not offer the portfolio ballast they once did," BlackRock said in December. And this week, the asset manager said: "Bond markets have started 2026 in a bumpy fashion," adding that this reinforced its analysis that "greater leverage can create vulnerabilities that expose the financial system to shocks like government bond yield spikes."
Traditional financial advice steers investors to a mix of stocks and fixed-income investments that shifts over time to become more conservative. For most people, fixed income has always meant bonds - leaning heavily toward government-issued Treasury products to protect their principal and provide steady income. But many people also dabble in corporate bonds and real-estate investment trusts, commodities like gold and silver and, more recently, cryptocurrencies. Hedge funds and private equity are still largely the domain of institutional and high-net-worth investors.
If you don't have billions of dollars in capital at your disposal, the idea that bonds are not what should be on the other side of your investment seesaw to balance out your risk in stocks could be mind-blowing.
"I'm fielding calls," said certified financial planner Josh Brooks, who is based in Texas and has clients who are mostly retired U.S. Army officers. "They want to understand the threat assessment, not panic. The question isn't whether bonds are 'bad,' but whether long-duration Treasurys can still serve their traditional role as portfolio ballast when the U.S. is financing $1 trillion in annual interest costs."
Another adviser, Laura Mattia, who is based in Sarasota, Fla., said she isn't getting calls right now, but only because her firm has been sounding the alarm to clients on the growing stock-bond correlation for the past five years. "We saw the correlations turning long before 2022, and we've been consistently teaching that bonds cannot be counted on as the sole diversifier in a portfolio," she said.
But all is not lost for retirees looking for safe investment strategies. There's no call from anyone for them - or investors of any age - to wholly abandon bonds in favor of all-stock portfolios. It's more about diversification, and there's more to fixed income than bonds, especially if you think on a global scale.
"BlackRock's comment is really about passive bonds in a very specific environment, not a blanket statement that bonds have 'stopped working,'" said Sean Beznicki, an adviser based in Vienna, Va. Current conditions may make Treasury instruments feel "less protective in the moment," he added. "But stepping back, bonds are still the most reliable hedge against equity risk over full market cycles, particularly when you look beyond Treasurys alone."
Other fixed-income options
Government and even corporate bonds aren't the only option in the fixed-income toolbox. BlackRock said it currently favors mortgage-backed securities and emerging-market bonds as two other choices. BlackRock also leans on private markets and hedge funds, saying: "We suggest looking for a 'plan B' portfolio hedge as long-dated U.S. Treasurys no longer provide portfolio ballast - and to mind potential sentiment shifts. We like gold as a tactical play with idiosyncratic drivers but don't see it as a long-term portfolio hedge."
While Brooks said that some of his military clients are heeding that call on gold because of its long track record in holding value, they are also looking for newer diversification options. Bitcoin is one area up for discussion for suitable clients with appropriate risk tolerance and time horizons. "This isn't speculation. It's portfolio-construction theory applied to emerging asset classes," he said.
Another is Treasury Inflation-Protected Securities, which adviser Mike Casey, who is based in Alexandria, Va., suggested as a way to provide an inflation hedge for retirees - something that is important beyond simply counterbalancing stocks. "I'm emphasizing shorter-duration bonds, one to five years, for stability and income, TIPS for inflation protection, and laddering to capture higher yields without locking in long-term exposure," he said. He's cautious, on the other hand, about gold: "It's volatile and not income-generating like bonds."
The bottom line on bonds for most of Jay Spector's clients, meanwhile, is that they are an investment vehicle, not a "shock absorber." Spector, a financial adviser in Arizona, positions bonds, particularly tax-free municipal bonds, for income today and with the potential for price appreciation if or when interest rates eventually move lower, rather than as a guaranteed offset to an investor's equity risk. "The old adage of 'buy a bond (fund or individual bond) and assume it hedges stocks' mindset doesn't work in this market," Spector wrote in an email.
The idea in long-term investing is always to make a plan and stick to it, and not make emotional choices based on headlines.
"Stay calm. Rebalance thoughtfully, focus on total return, and remember, markets reward patience over panic," Casey said.
Got a question about investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write to me at beth.pinsker@marketwatch.com. Please put "Fix My Portfolio" in the subject line.
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January 30, 2026 12:35 ET (17:35 GMT)
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