As bonds lose their role as a portfolio stabilizer, investors turn to commodities and physical assets to hedge against inflation

智通财经2026/07/23 10:26

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U.S. investors who previously relied on bonds to cushion stock market declines are now turning their attention to commodities, infrastructure, private credit, and other asset classes sensitive to inflation, in response to persistent inflation risks. The core issue is that the effectiveness of bonds as a portfolio stabilizer is being eroded by multiple factors.
High inflation levels, massive government borrowing, increased policy uncertainty, and the frequent occurrence of simultaneous declines in stocks and bonds have collectively weakened the hedging function of fixed income. Although U.S. consumer inflation has currently fallen back to around 3.5%, tensions between the U.S. and Iran could again increase price pressures through rising oil prices.
Recently, some institutions reduced the fixed income allocation in the 60/40 portfolio from 40% to 31%, and for the first time in 15 years, introduced a 6% commodities allocation. The reason is that bonds have not provided sufficient downside protection during equity sell-offs. At the same time, they are shifting from passive strategies to active ones such as CLOs, MBS, and high-yield bonds to expand sources of return.
When the inflation rate remains above approximately 2.7%, the correlation between stocks and bonds usually turns positive, meaning both fluctuate in the same direction, weakening the diversification effect. Only during recessions do U.S. Treasuries still play a safe-haven role, while bonds with maturities over five years face too many adverse factors and lack sufficient support.
Against this backdrop, deglobalization, supply chain constraints, and rising defense spending are reshaping investment logic. Fiscal policy now exerts more influence than monetary policy, and some institutions are guiding clients to shift from developed market fixed income to inflation-hedged portfolios composed of commodities, gold, real estate, and infrastructure, with tangible assets ultimately becoming the destination for funds.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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As bonds lose their role as a portfolio stabilizer, investors turn to commodities and physical assets to hedge against inflation

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