Betting on Croissants, Bonds, and Risk Management

Readers may remember that last year, my partner Tim Macarak, CFP®, and I made a friendly bet. Mid-year, I confidently predicted that the 10-year Treasury yield would hit 5% or higher by year-end. The stakes? A ham, egg, and cheese croissant from Artisan Croissanterie in Media, PA. It wasn’t just any croissant—it’s one of the best breakfast sandwiches around.

Tim took the under.

By the end of the year, I was handing over the sandwich and taking my loss in stride. Rates had climbed, but not quite to 5%. While I may have lost, given the binary nature of the bet outcome, not to worry, this is not how we seek to manage portfolios 😉.

This little wager underscores an important principle in investing: at Members’ Wealth, we never “bet the farm” on a single outcome. Markets are unpredictable, and while analysis and strategy are essential, we know better than to treat any projection as a certainty. Experience has taught us that humility and adaptability are as important as data and expertise.

And speaking of humility, here are a few reflections on the current state of the bond market and why it might be worth getting excited (yes, excited) about bonds right now.

The Risk in Bonds: The Longest Drawdown in History

Rising interest rates have made bonds a challenging asset class for more than four years. Charlie Bilello’s data reveals that the U.S. bond market has now been in a drawdown for 53 months—the longest on record.

Why? When rates rise, bond prices fall. For holders of long-duration bonds, this creates significant mark-to-market losses. This year has been no exception, with the 10-year Treasury yield climbing more than a full percentage point since the Federal Reserve’s first rate cut in mid-September.

Buying bonds in this environment feels like trying to catch a falling knife. It’s tough, but for patient investors with a long time horizon, opportunities are beginning to emerge.

The Opportunity: Why Bonds Are Starting to Look Attractive

Here’s the good news: with higher rates, bonds now offer more attractive yields than they did just six months ago. For investors with a long-term perspective, locking in mid-single-digit returns for years to come is an exciting opportunity.

At Members’ Wealth, we balance short-term safety with long-term potential. This means keeping a close eye on duration—opting for shorter-term bonds for stability—while selectively extending into longer-term bonds to lock in favorable yields.

According to Bespoke Investment Group, the 10-year Treasury yield is approaching “extremely cheap” territory based on their fair valuation model. Historically, negative returns in the 10-year Treasury are typical in the year leading up to a Fed rate-cutting cycle. While returns have been weaker than average post-cut, the current environment could pave the way for a stronger finish.

Managing Risk While Seizing Opportunity

The key to navigating today’s bond market is the same as managing any investment: balance. Individuals or gamblers might go all-in on one “sure thing,” but throughout our careers we’ve learned the hard way that there’s no such thing in investing. (And it’s always best to hire investment managers that have made plenty of mistakes and learned from them!!) Instead, we focus on rigorous analysis, reflection, and portfolio adjustments to manage risk while positioning for potential gains.

With rates marching toward 5% again, Tim isn’t taking the same bet this year, and I’ll need to find another way to earn my next croissant. But for investors, this rising rate environment offers something even better: the chance to lock in attractive yields for the long haul.

So, if you’re wondering what this all means for your portfolio—or if you’d just like a great croissant recommendation—reach out.

Investment advisory services offered through Member's Wealth, LLC, a registered investment advisor. The Dow Jones Industrial Average (DJIA) is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The S&P 500 index is designed to be a broad based unmanaged leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe or representative of the equity market in general. The National Association of Securities Dealers Automated Quotations (NASDAQ) is an American stock market that handles electronic securities trading around the world. The Russell 2000 index is an index measuring the performance of approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States. Visit www.russell.com/indexes/ for more information regarding Russell indices. The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The Bloomberg US Aggregate Bond Index, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.

About the Author – Dane Czaplicki, CFA®

Dane Czaplicki is CEO of Members’ Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of wealth management experience, Dane and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations. He believes everyone needs sound financial advice from someone whose interests are aligned with theirs, and is determined to put service before all else.

Dane received his MBA from The Wharton School of Business at the University of Pennsylvania and his bachelor’s degree from Bloomsburg University. Outside work, he enjoys spending time with his wife and kids, hiking and camping, reading, running, and playing with his dog. To learn more about Dane, connect with him on LinkedIn.

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