If you aggregate the bond returns all of countries and 'invest' in that return series, almost certaintly your backtest will stop at some point because you will lose 100%.
Even if somehow you don't, you will be hit with several 90-99% real return drawdowns (with no offsetting big gains like usually happens in stocks), which calls into question in how one should invest in that asset class in the first place. It's very difficult to produce a positive return after losing such huge amounts.
There is just so many countries that wiped out bond investors (either through inflation, outright default or something else), the more data I get the more I think that fixed income is like a big illusion. Check out Reinhart and Rogoffs book, even countries like the US have had 200% inflation in one year.
US investors like it because they are looking from the perspective of suvivorship bias. They did great (like top 5 in the planet over the last 100 years great) but that doesn't tell you the average or median global experience nor it tells what's going to happen in the next 100 years. Also, people from around the world read finance books written by US authors (who have that suvivorship bias perspective) and they draw conclusions that they should not about their own country fixed income markets. These folks are then driven to the slaughter house
Only way I can see fixed income making any sense (in the long-run), is to have some kind of stop loss/exit strategy or to invest in a global fixed income portfolio with many countries in it. Otherwise, the clock is ticking and at some point you will lose it all or close to it. If you are fortunate enough to have choosen the 'right' country, you might avoid that your whole life, but that doesn't mean that you didn't play financial russian roulette...
Even if somehow you don't, you will be hit with several 90-99% real return drawdowns (with no offsetting big gains like usually happens in stocks), which calls into question in how one should invest in that asset class in the first place. It's very difficult to produce a positive return after losing such huge amounts.
There is just so many countries that wiped out bond investors (either through inflation, outright default or something else), the more data I get the more I think that fixed income is like a big illusion. Check out Reinhart and Rogoffs book, even countries like the US have had 200% inflation in one year.
US investors like it because they are looking from the perspective of suvivorship bias. They did great (like top 5 in the planet over the last 100 years great) but that doesn't tell you the average or median global experience nor it tells what's going to happen in the next 100 years. Also, people from around the world read finance books written by US authors (who have that suvivorship bias perspective) and they draw conclusions that they should not about their own country fixed income markets. These folks are then driven to the slaughter house
Only way I can see fixed income making any sense (in the long-run), is to have some kind of stop loss/exit strategy or to invest in a global fixed income portfolio with many countries in it. Otherwise, the clock is ticking and at some point you will lose it all or close to it. If you are fortunate enough to have choosen the 'right' country, you might avoid that your whole life, but that doesn't mean that you didn't play financial russian roulette...
