Anything But Bonds - Mount Columbia

Mount Columbia Private Wealth Anything but bonds

by shamez kassam

January 30, 2026

Uncategorized

For forty years, bonds were the bedrock of every balanced portfolio. Safe. Reliable. Boring in the best way.

Then came 2022.

Long-term government bonds—the safest of the safe—lost 31% of their value in a single year. From their 2020 peak, they dropped nearly 48%. The asset class that was supposed to protect portfolios didn’t just fail to protect them. It made things worse.

Bank of America’s chief investment strategist Michael Hartnett has a name for what happened: “bond-market humiliation.” And his conclusion is blunt. We’ve entered the era of “Anything But Bonds.”

The Shock Absorber That Stopped Working

Here’s what bonds were supposed to do: when stocks fell, bonds would rise. Investors would rebalance, selling high and buying low. The portfolio would stabilize. Everyone would sleep well at night.

That’s not what happened.

In 2022, stocks fell 18%. Bonds fell 13%. The 60/40 portfolio—60% stocks, 40% bonds—lost 16%. There was nowhere to hide.

The problem isn’t that bonds had a bad year. The problem is that the fundamental relationship between stocks and bonds has changed. When inflation is the enemy, both asset classes suffer together. The diversification benefit that investors counted on simply vanishes.

Why the Old Playbook Stopped Working

For four decades, interest rates fell almost continuously. From 15% in 1981 to near zero by 2020. That was the golden age of bonds. Prices rose as rates fell. Investors got paid to hold them.

That tailwind is gone.

Rates have risen sharply and are staying higher for longer. Governments are running massive deficits, flooding the market with new bonds. Inflation, while lower than its peak, remains sticky. The conditions that made bonds a reliable portfolio anchor have fundamentally shifted.

Hartnett isn’t alone in this view. Across Wall Street, strategists are questioning whether bonds can still do the job they were hired to do.

What’s the Alternative?

If bonds can’t protect your portfolio, what can?

This is where pension funds have been ahead of the curve for years. Canada’s largest institutional investors—CPP, Ontario Teachers’, AIMCo—allocate heavily to private credit, infrastructure, and real estate. These assets generate income, provide diversification, and don’t move in lockstep with public markets.

Private credit, in particular, has emerged as a compelling alternative to traditional bonds. It offers higher yields, floating rates that benefit from rising interest rates, and lower correlation to equity markets. Global private credit has grown from $250 billion in 2007 to over $1.7 trillion today.

Infrastructure offers inflation-protected cash flows tied to essential assets: energy, transportation, digital networks. Real estate provides income and appreciation potential outside of public market volatility.

These aren’t exotic bets. They’re the same strategies that institutional investors have used for decades to build resilient, income-generating portfolios.

Investors need to keep in mind that private investments are less liquid. Typically, product structures have a 1-year hold, followed by the option to get liquidity. If, however, too many investors redeem at the same time, the liquidity can be limited. You can mitigate this risk by only investing in large, global “best of breed” managers whose clients are largely pension funds and endowments.