Here is some additional insight regarding the correlation between stocks and bonds, courtesy of the IMF. The organization highlights that following the onset of the pandemic, fixed income assets have become less reliable for softening volatility within equity markets. Rather than acting as a counterweight to the risks associated with stocks, bonds are frequently trending in the same direction. This synchronization becomes especially evident during periods of intense market liquidation.

I would add that the significant spike in positive correlation, which compromises the classic efficacy of diversifying portfolios with stocks and bonds, has seen a partial reversal during the most recent timeframe. Even with this adjustment, however, the historical negative correlation is still uncharacteristically frail.

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