The divergence between stocks and bonds may be coming to an end, requiring a shift in investor assumptions. With an upcoming new era of rising inflation, equities and bonds will return to their well-known rising correlation compared to the experience over the last thirty years, in which despite positive returns from both asset classes, the correlations have been negative. Investors will now find it harder to diversify and contend with market volatility.
See Cormac Mullen, Forget 30 Years of Stock and Bond Divergence, Bernstein Says, Financial Advisor, January 10, 2017.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
