Bank of America strategists say that since April 2020, the total return on 30-year bonds has dropped by 45%. This is the biggest drop in four years in more than 100 years.
Over the past 30 years, the BX:TMUBMUSD30Y has not done very well. This is because of high inflation (which has slowed down some) and a lot of government spending.

In the 1990s and 2010s, the economy was a “2+2=4” economy, which means that 2% growth plus 2% inflation equals 4% nominal GDP growth. Now, according to Bank of America strategists led by Michael Hartnett, the economy is a “2+4=6” economy, which means that 2% growth plus 4% inflation equals 6% nominal GDP.
Since the last GDP report, which covered the first quarter, there was 1.6% real GDP growth and 4.8% nominal GDP growth. However, nominal growth did average about 6% last year.
Bonds are going through a big bear market, and credit, stocks, and commodities are going through what some people call a “anything but bonds” bull market.
Stocks SPX are in a late secular bull market, with no change in leadership since 2009, no recession to change it, and with valuations inconsistent with a new bull market, they say. Commodities are in an early secular bull market, driven by debt, deficits, inflation, AI, climate change and reverse globalization, with U.S. import tariffs the highest since 1971, they add.
But Hartnett and team say the 3Ps of positioning, policy and profits argue for a reversal of the ABB trade in the second half.
On positioning, no one is long the 30-year, which means it’s the obvious pain trade in the second half.
Stagnation of real retail sales, the stalling of the global upturn in purchasing managers indices and labor market weakening argues for a risk to profits. As for policy, investors recognize fiscal stimulus is as good as it gets, and at the margin, easier monetary policy and tighter fiscal policy will be positive for bonds.
See Also : When the US released inflation data ahead of schedule, the market was unaware of it.