Episode 43: Can I-Bonds Help Business Owners Fight Inflation?

In this episode, Brett shares why I-Bonds may be an effective investment opportunity for business owners who want to outpace inflation.

Like many of you who may be pet owners, the first thing I do every morning is bring my two golden retrievers (Chase and Bruno) out for a little walk. And yes, I am one of “those people” who still has newspapers delivered to my home every day.

When I opened today’s Wall Street Journal, two negative headlines caught my attention immediately.

The first was “U.S. Inflation Hits New Four-Decade High of 9.1%.” And right underneath that first article was the title “Bond Market Volatility Deepens After Inflation Report”.

With these two headlines, I decided I had to host a podcast episode on this topic. Here’s what I’m going to get into today, specifically:

As inflation has continued at 40-year highs, the Federal Reserve is unsuccessfully playing catch up. In June, they raised rates by 0.75%, making it the most aggressive rate hike since 1994.

These rate hikes have been problematic for bonds, which are having their worst year in over 50 years.

Now, why is that important? Because for decades, bonds have functioned as the ultimate diversifier for business owners who invest in the markets.

When stocks were down, bonds were up. Indeed, there was even a saying that a bad year in bonds is a bad day for stocks.

But recently, and what those newspaper headlines I read are saying, bonds haven’t been helping like they used to. In fact, the aggregate bond index is down over 9% on the year. Thus, it’s been a brutal period.

But unlike the past two years, equities aren’t making up for these losses, so the negative performance of bonds is magnified.

Given the recent headlines, I thought it would be helpful to offer some explanation as to why bond prices have fallen during this inflation spike, what options business owners might have to deal with it, and what we might expect moving forward.