When markets get rocky, bonds become the grown-up in the room. They don’t soar like tech stocks in a bull run, but they offer something just as valuable— stability. In 2022 and early 2023, when inflation ran wild and both stocks and bonds took a hit, investors wondered if the 60/40 portfolio was dead. But don’t count out bonds just yet.
As we look to the recent U.S. election that returned Donald Trump to the White House, the North American bond market isn’t just a tool for diversifying your investment portfolio—it may also be a check on political power.
Let’s unpack why bonds still belong in your investing strategy—and how they might rein in even the most powerful politicians.
When stock markets tumble, investors typically flee to safer assets—like bonds. This flight to safety pushes bond prices up, since demand increases, and yields down. That’s why traditional advice recommends a mix of equities and bonds, especially as you get closer to retirement.
Here’s how bonds typically behave:
Yes, 2022 was the rare exception when both bonds and stocks fell, thanks to rapidly rising interest rates. But historically, bonds are insurance against equity volatility.
A bond ETF lets you hold dozens (or hundreds) of bonds in one easy, low-fee product— making it ideal for passive, long-term investors. Whether it’s Canadian government bonds (like ZAG or VGV) or U.S. treasury-focused ETFs (like BND or TLT), these funds:
A few examples of bond ETFs to consider:
Bond ETFs make sense not just for retirees but for anyone seeking to lower volatility, preserve capital, or hold income-producing assets.
Here’s where it gets political.
Donald Trump was re-elected in 2024 along with his ambitious economic goals— like sweeping tax cuts, tariffs, and increased spending— will run up against one immovable object: the bond market.
Why?
Because the U.S. government has to borrow money to pay for big fiscal policies. That means issuing more Treasury bonds. But if investors (domestic or foreign) believe Trump’s policies will increase the deficit, fuel inflation, or create long-term instability, they’ll demand higher yields in return. That makes borrowing more expensive.
In short: the bond market can punish poor fiscal policy with rising interest rates, forcing even powerful governments to reconsider their strategies.
As former U.S. political advisor James Carville once said:
“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope. But now I want to come back as the bond market. You can intimidate everybody.”
Even though we’re north of the border, U.S. political moves ripple across North American markets. Rising U.S. bond yields can drive Canadian yields up too, affecting mortgage rates, equity valuations, and yes—your bond ETFs.
But there’s also opportunity:
Bonds might not be flashy, but they’re a crucial piece of any well-balanced portfolio— especially during uncertain times. As politics, inflation, and global risk continue to shift, smart investors will look to the bond market not just for yield, but for insight.
So, if you’re building your own nest egg, don’t ignore the steady strength of bonds. They’re your best friend when markets go haywire—and your secret weapon when the world gets unpredictable.
Despite recent headwinds, bonds remain essential portfolio stabilizers, especially in uncertain times. Bond ETFs offer easy diversification, and the bond market itself acts as a powerful check on government fiscal policy, influencing interest rates and opportunities for investors globally.
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