The first quarter was a bumpy ride for both stock and bond investors as concerns around inflation and Ukraine led to increased volatility.

Whenever we are in a period of volatility and re-pricing in my asset classes, one of my favorite charts to review is this one by JPMorgan – which shows what average future returns have been based on current valuations…

Bonds, a typically safe and less volatile asset when compared to stocks, had their worst-performing quarter in decades. In fact, as of this writing in the first week of April, bonds are down nearly 8% from their highs.

The stock market is off to a bumpy start to the year. As of market close on Friday, the S&P 500 was 8% off its high. Other parts of the stock market were down even more – the Nasdaq tech-heavy stocks were down more than 12%, small-cap stocks in the Russell 2000 were down 18%…

Clients of mine know that we tilt heavily toward low-cost broadly diversified index funds to build portfolios. This has historically produced far better returns than using higher fee active fund managers to try to outperform the market.

However, there are a few areas of the market where we believe good active managers can outperform the index simply due to the flaws in how that index is made. One of those indexes is the bond market…