AQR examines whether historically low bond yields justify major asset allocation changes or reinforce diversification across return streams. The paper argues low yields alone do not eliminate bonds’ portfolio value, noting German and Japanese 10-year government yields turned negative in 2016 while timing remained unreliable.
Asset Allocation in a Low Yield Environment
AQR
John Hussman
Research
20 Pages
Key Takeaways
Yield Curves Matter: The paper argues bond excess returns historically come from upward sloping yield curves, not starting yield levels, even after 10-year sovereign yields fell below 0% in 2016.
Timing Signals Weak: Tactical allocation shifts based purely on valuation showed limited success historically, despite bond and equity expected returns sitting well below long term averages.
Diversification Still Helps: Even with depressed yields, bonds retained diversification benefits across multi asset portfolios, including during periods when equity markets experienced double digit drawdowns.
Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week
Related Content
