Some of the popularity that this "bonds are for safety" has to do with the weak grasp that many investors, even professional investors, have on the concepts of portfolio diversification and derisking.
Another important factor, I suspect, is a logical fallacy known a the Fallacy of Composition.
Before presenting the actual definitions, let me present an example.
1) Fruit is tasty
2) Cake is tasty
3) Therefore, fruitcake must also be tasty. <h/t to Jim Gaffigan>
This fallacy, which I think manifests among investors as a behavioral bias towards short-term bonds, manifests when people erroneously extrapolate the characteristics of the component (e.g. the riskiness of the bond fund) up to the level of the aggregate (e.g. the riskiness of the portfolio) without taking into account how the components are arranged within the aggregate.Fallacy of Composition: (also known as: composition fallacy, exception fallacy, faulty induction)
Description: Inferring that something is true of the whole from the fact that it is true of some part of the whole.
Example of the fallacy: bond fund A is less volatile than bond fund B, therefore a portfolio containing bond fund A must be less volatile than a portfolio containing bond fund B.
Students of portfolio construction will spot the error in the example statement, which is that the interaction between the bond fund and the other portfolio components is ignored.
Vanguard published a short note on behavioral finance in which what they call "framing" is really about to the Fallacy of Composition:
Virtus Investment Partners published a note called Diversification Means Always Having To Say You’re Sorry that also touches on this:Finance theory recommends we treat all of our investments as a single pool, or portfolio, and consider how the risks of each investment offset the risks of others within the portfolio. We’re supposed to think comprehensively about our wealth. Rather than focusing on individual securities or simply our financial assets, traditional financial theory believes that we consider our wealth comprehensively, including our house, company pensions, government benefits and our ability to produce income.
However, human beings tend to focus overwhelmingly on the behaviour of individual investments or securities. As a result, in reviewing portfolios investors tend to fret over the poor performance of a specific asset class or security or mutual fund. These ‘narrow’ frames tend to increase investor sensitivity to loss. By contrast, by evaluating investments and performance at the aggregate level, with a ‘wide’ frame, investors tend to exhibit a greater tendency to accept short-term losses and their effects.
What often flows as an outcome from the "bonds are for safety" heuristic is a portfolio that has a lower risk-adjusted return and less diversification than would be produced by a more rational heuristic.That’s where the second bias comes into play. Our cognitive tendency is to focus on pieces of the whole rather than the whole itself. Not only is it easier to focus on one versus many, it’s then that much more taxing to take on the relationships between the various pieces. When given transparency, we are not wired to see the one portfolio; we instead home in on the individual investments that comprise it.