April was stormy for equity investors, but even retail investors holding onto Treasurys went on a wild ride – complete with sharp price swings. President Donald Trump’s “reciprocal” tariff rollout on April 2 and subsequent suspension of higher rates spurred volatile trading in stocks. At one point, the S & P 500 briefly slid into a bear market , dropping more than 20% from its February record, before dialing back its losses as retail investors bought the dip. The broad market index ended Wednesday – the final trading day in April – about 9% off its record close. .SPX 1M mountain The S & P 500 over the past month On the fixed income side, the 10-year Treasury yield initially dropped upon the rollout of Trump’s slate of tariffs, but then surged in a matter of days , with the rate surpassing 4.5% on April 9. The 10-year Treasury yield traded at about 4.2% on Thursday. Bond yields and their prices move inversely to each other. That means last month investors were watching their safe Treasurys come down in value just as they were facing paper losses on the equities side of their portfolio. “We have a lot of volatility in the markets right now,” said Kathy Jones, chief fixed income strategist at Schwab Center for Financial Research. “I don’t have doubts about the full faith of the government in paying [Treasurys] on time, so if it’s part of an overall plan, you don’t need to change that,” she added. Hang tight In much the same way it would be irresponsible to dump your stocks and flee to cash in the middle of a sell-off, holders of individual bonds – Treasurys in particular – ought to sit tight. Treasurys are backed by the full faith and credit of the government. They’re high in quality, and the income they pay is exempt from state and local taxes (but subject to federal levies). Investors holding individual Treasurys, be they bonds, notes or bills, can count on receiving interest payments. Even as their value may fluctuate during tumultuous markets or when interest rates change, bondholders can count on receiving their interest income twice a year and their par value at maturity. US10Y 1M mountain The U.S. 10-year Treasury yield in the past month “If you hold the individual Treasurys, ideally you’re aligning your goals with the maturity date, and if you hold them until then,” they’re paid back in full, said Catherine Valega, certified financial planner at Green Bee Advisory. Market gyrations may be a little tougher for bond fund investors to ride out, however. In this case, you get the benefit of diversification and lower costs, but you will see regular fluctuations in prices. Investors don’t have control over the maturity of the underlying issues, either. In tumultuous times, bond fund investors have to remember their priorities. “One of the things we tell people when they invest through funds is ‘What is your time horizon for investing in this fund?'” said Jones. “If it’s five years, don’t react if the price comes down in six months.” “It’s often hard with funds,” she added. “The way they’re reported, people don’t see accumulated income or the value of the income received. People see the price come down, sell and lock in the loss, and then they haven’t had the accumulation you’d get from holding the fund.” More rocky times ahead It’s only May, but investors can expect more volatility to come for both stocks and bonds, especially as White House tariff policy unfolds, swinging the economy along the way. Be mindful of your plan and time horizon : Check in with your financial advisor to ensure that your portfolio still reflects your risk appetite and time horizon. Avoid knee-jerk reactions, whether it’s dumping stocks or losing sleep over your bond portfolio. Stay high in quality: Keeping an eye on credit quality will give you peace of mind. “If we do run into a recession or a downturn in the economy, where it will be felt in the bond market is in high yield and emerging market bonds where quality is more questionable,” said Jones. Keep some cash handy: The most conservative part of the portfolio for Valega’s clients includes high-yield savings, certificates of deposit and Treasury bills. These instruments are short term and not subject to price fluctuations as in long-dated bonds. “The further you go out on the maturity curve, the more volatility you risk,” Valega said.
