Stocks and bonds
Headlines
The stock bond correlation went positive, after decades being negative, due to the inflation shock. If inflation receeds, that correlation will likely return to a low or negative value.
Detail
You’ve got solid yields on credit (5-6%), and even on treasurys (~4%). If inflation behaves, which it looks like it will, we can expect that negative correlation to return/resume.
In which case a positive ex ante return asset class with low to negative correlation to stocks is a very good thing to hold.
And the 60/40 portfolio is definately not dead.
Those periodic negative returns are preciesley why there are risk premia in the first place. If it wasn’t for the occasional painful drawdown, we’d all find our wealth grows at scarcely above inflation.
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