Treasuries, Temperament and ‘Wimpy’ Income Investing: How the Pros Say to Ride Out a Market Rout
When tech stocks cratered and everyone ran for Treasuries, one group of retirees had already won the day. The difference had nothing to do with market timing, and a single number in your own portfolio decides which side you land…
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Eric Weiner, a Bloomberg senior editor, summed up November 5’s market on Bloomberg Businessweek in two sentences: “Today’s kind of a sell-everything day. The only real port in the storm is Treasuries because the yields are down.” Fears of an AI crackdown after the Democrats’ midterm wins set off a historic rout in tech stocks, and traders flocked to Treasuries for safety.
For anyone at or near retirement, the stakes are concrete. A rout does the most damage when it forces you to sell stocks at low prices to pay the bills. Weiner is right, but his point only helps people who owned Treasuries before the selling started.
Why Falling Yields Put Money in Bondholders’ Pockets
A bond’s interest payment is fixed when it is issued. When scared investors rush into Treasuries, they bid up prices, and the yield a new buyer receives falls. Price and yield move like a seesaw.
The 10-year Treasury yield fell from 4.95% on November 3 to 4.84% on November 5.
That 0.11 percentage point drop sounds small. Duration measures how much a bond’s price moves when rates change. Assuming a duration of 8 for a 10-year note, that drop works out to a price gain of almost 1% in two sessions while stocks were falling. A gain that arrives just as stocks drop is the whole reason to own Treasuries.
Starting Yield Is the Number Retirees Should Anchor On
Colin Martin made the case on On Investing, the podcast from Charles Schwab: “Starting yield tends to be a very good indication of forward returns. Not that you can’t see prices fall a little bit further from here, but we think the starting yield is attractive.”
Starting yield is the return you lock in on the day you buy. Hold a Treasury to maturity and you earn about that yield no matter how the price swings along the way. For a bond fund, the fund’s yield to maturity plays the same role.
The 2-year Treasury now yields 4.46%. At that rate, $100,000 earns about $4,460 a year. However, the national average 12-month CD pays 1.76%, or about $1,760. Leaving safe money in an average bank CD costs real income.
Martin’s caveat matters too. Schwab’s outlook assumes the Federal Reserve raises rates twice more, in December and likely early 2027. Prices could dip if that happens. Holding to maturity takes that risk off the table.
How Many Years of Withdrawals Your Safe Assets Cover
One number determines whether a rout like this one costs you money: how many years of withdrawals your Treasuries and cash can cover. Take an example retiree who draws $60,000 a year and owns only stocks. If stocks drop 20%, raising $60,000 means selling shares that were worth $75,000 before the decline.
That is $15,000 of value she will never get back when prices recover. Planners call this sequence-of-returns risk, and it does the most damage in the opening years of retirement. (We put together a free guide on defending that first stretch.) Give her two years of withdrawals in Treasuries, and she pays her bills from bonds. Her stocks have time to recover.
Portfolio manager Jenny Harrington explained on On Investing why that buffer matters emotionally: “If you know that you’re a wimpy income investor like me, and you’re invested correctly for your emotional constitution, you will get through whatever nasty bear market comes your way.” She added that most investment wisdom “doesn’t talk about valuing a company, doesn’t talk about asset allocation. It talks about behavior and good investment behavior.” Her bottom line: “It’s all about knowing yourself.” If November 5 made you want to sell everything, your allocation is too aggressive for your temperament. Fix it once markets calm down.
Put a Hard Ceiling on Speculative Money
Economist Rebecca Patterson drew the line on the same episode: “If you’re someone who loves to trade and you’re a short-term trader, that’s fine. But figure out what percent of your total wealth you can afford to put in that bucket, knowing that it might go through the roof and it might go to zero.”
On an example $800,000 portfolio, a 5% cap means no more than $40,000 goes to trades. If that bucket is wiped out, the retirement plan remains intact.
Strategist Liz Ann Sonders gave the reason on On Investing: “Investing is about owning. Gambling is about hoping. As an investor, you are also a participant. You’re a participant in wealth creation.”
A Five-Step Rout Checklist for Retirees
- Count your runway. Add up your Treasuries, cash, and CDs, then divide by your annual withdrawals. Less than two years means you could be forced to sell stocks in the next downturn.
- Compare yields before putting cash to work. Check the current two-year Treasury yield against your bank’s CD rate. The national average CD pays far less, and the gap compounds every year.
- Hold to maturity. Buy individual Treasuries timed to when you need the money. Price swings in between stop mattering because you collect your starting yield.
- Rebalance on a calendar. Pick a set date to bring your stock and bond mix back to target. Reacting to headlines leads to selling low.
- Fence off speculation. Choose a fixed percentage of your wealth for trading. Assume it could go to zero, and never add to it from your income bucket.
The Treasuries that protect you in a rout are the ones you bought before it started, so build that runway while markets are calm.
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Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.
Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community.
Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.
Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, moderating workshop sessions at regional conventions.
