BONDS ROLE TRANSFORMATION IN GLOBAL INVESTMENT PORTFOLIOS: AN ANALYSIS OF RETURNS AND CORRELATIONS (2008–2025)

Abstract

The article devoted to aim to revise the role of bonds in the construction of long-term investment portfolios in an era of recurrent crises, heightened macroeconomic volatility and structural shifts in global capital markets. The relevance of this topic stems from the erosion of the traditional “60/40” paradigm, the resurgence of bond yields after a prolonged low-rate environment, and the specific vulnerabilities faced by investors in economies with elevated sovereign risk, fragile institutions and limited social support. In such contexts, the conventional view of bonds as a purely defensive asset class becomes insufficient, as their contribution must be evaluated not only through the lens of expected returns and variance, but also in terms of behavioural responses and the sustainability of household financial decisions over the life cycle. The study employs a combination of quantitative and qualitative methods, integrating elements of classical portfolio theory with insights from behavioural finance. On the quantitative side, it relies on long-horizon data for major asset classes over the period 2008–2025, including time series of returns, volatility and cross-asset correlations under different macroeconomic regimes characterised by changing inflation and interest rate environments. On the qualitative side, the analysis incorporates scenario-based reasoning and practitioner-oriented observations regarding investor behaviour, with particular emphasis on loss aversion, panic selling and the perceived safety of government securities. The results demonstrate that bonds cannot be treated as a homogeneously “low-risk” asset, since their relative riskiness and portfolio contribution are highly sensitive to macroeconomic conditions and market stress episodes. The empirical evidence shows alternating phases in which bonds either cushion equity drawdowns or amplify portfolio risk, challenging the simplistic application of static asset allocation rules. At the same time, the findings indicate that, for many private investors, especially in emerging and crisis-prone economies, the presence of bonds in the portfolio helps to stabilise cash flows, reduce the amplitude of drawdowns and mitigate behaviourally driven errors such as capitulation at market troughs. The practical value of the article lies in providing a more nuanced framework for incorporating bonds into household investment strategies and advisory practice. The insights can be applied in the design of personal financial plans, the development of retirement-oriented products and the structuring of collective investment vehicles that better align with the needs of private investors operating under persistent uncertainty.