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Bond Funds Endure a Year of Economic Anxiety

Bond markets grappled with monetary policy and political unknowns in 2018.

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Following two years of risk-on market fervor, 2018 delivered a reality check to bond investors. 

Even with new leadership, the Federal Reserve continued to raise short-term interest rates and simultaneously pared back its quantitative-easing-inflated balance sheet; both were efforts to normalize monetary policy while U.S. economic data appeared strong. A strengthening dollar, escalating U.S. trade-policy fears, and myriad geopolitical tensions further rattled markets at points throughout the year, which ended with a meager single-basis-point return for the Bloomberg Barclays U.S. Aggregate Bond Index. 

Emory Zink does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.