12-month rolling correlation between the US 10-Year Treasury and the S&P500 back to 1945 (US recessions are shaded in grey). Over a longer-term timeframe, the inverse correlation between stocks and bonds has only been a feature of the 20-year period between the early 2000s and the post-Covid inflation shock. We should not lazily expect fixed income to play the same portfolio diversification role as it did before.
Your 🐿️ is not in the business of making alarmist hyperinflation calls but a call for a period of inflation volatility (with a higher floor) does not feel unreasonable.
The inflation volatility of the 1970s was most certainly not a good environment for buy and hold fixed income investors. This came with limited evidence of inverse correlation until Paul Volcker came along and kicked off the multi-decade bull run in fixed income.
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Macro for Civilians. Sharing successes and failures in the 30-year hunt for acorns in the markets. Finance observations are hit and miss.
Macro for Civilians. Sharing successes and failures in the 30-year hunt for acorns in the markets. Finance observations are hit and miss.
Pod: Trending. The 🐿️ and the Turtle.