Are Bonds Still a Good Diversifier?

Have bonds regained their role as an effective diversifier for equity portfolios? Where does cash fit into today's asset-allocation discussion? Morningstar portfolio strategist Amy Arnott examines how correlations between stocks and bonds have evolved over the past year, and which fixed-income sectors have provided the strongest support during market downturns. We also explore municipal bonds, why cash has stood out as a portfolio stabilizer, rising-rate pressures, and what recent market behavior may mean for diversification across asset classes. 00:00 – Introduction 00:10 – How 2022 changed stock-bond correlations 00:51 – Has fixed income regained diversification benefits? 02:33 – Which bond sectors best diversify equity risk? 05:38 – How munis have performed in 2026 For investing professionals, from Morningstar: Read more on the 2026 diversification landscape: https://www.morningstar.com/business/... Subscribe for more fixed income content:    / @morningstar.business   Find our latest perspectives: https://www.morningstar.com/business/... Explore our research library: https://www.morningstar.com/business/... Connect with us on LinkedIn:   / morningstar   #fixedincome #morningstar #diversification #assetallocation