Home›ETFs & Funds›Fund Industry›Stock and bond correlations hit a 1997 high

Stock and bond correlations hit a 1997 high

The correlation between stocks and bonds recently reached +59%, and the article links the shift to bonds once again offering meaningful income.

Reported · Written up by our desk · Fund Industry

ETF Trends says the diversification benefit from holding stocks and bonds has weakened, pointing to a recent jump in the stocks-bonds correlation to +59%, the highest positive level since 1997.

The outlet notes that the correlation figure reflects daily moves that have already occurred, and stresses that stocks and bonds can still diverge over longer periods even if they move together on a given day.

ETF Trends also argues the backdrop may be supportive for both asset classes, citing bonds returning to providing meaningful income after years of abnormally low interest rates, and compensating investors for duration risk.

The article attributes part of the shift to the Federal Reserve facing less need for intervention, while bonds and stocks show stronger same-direction behavior around their respective longer-term trends.

More like this

Sources