Spotlight Bonds Is It Time to Pick Up the Pieces? Sustainable Bonds Present New Opportunities 32 36 Don't Lose Faith in Fixed Income Inflation holds the key, but over time, bonds should return to their diversifying ways. DIVERSIFICATION Lauren Solberg Perhaps no development caught investors off guard last year more than the failure of the tried-and-true diversification strategy of owning bonds to cushion against losses in the stock market. The inability of so-called 60/40 portfolios-diversified strategies with 60% stocks and 40% bonds-to protect investors during the bear market in stocks upended what had become conventional wisdom: Stock and bond prices tend to move in opposite directions. In a bear market like last year's, bonds should have helped a portfolio, not inflicted more damage. " The question many investors are asking themselves is this: Does diversification still make sense? Will it still provide value? " says John Queen, lead fixed-income portfolio manager at Capital Group and a manager on the $198 billion American Funds American Balanced Fund ABALX. morningstar.com/products/magazine 27https://www.morningstar.com/funds/xnas/abalx/quote https://www.morningstar.com/funds/xnas/abalx/quote http://www.morningstar.com/products/magazine