Stocks and Bonds Just Fell Together Again. History Says This Is What Investors Should Own When Diversification Breaks.
Stocks and bonds had an historically bad September. The good news is that there are alternatives if you want to reduce portfolio risk.
Overview
Over time, stocks and bonds generally exhibit a negative correlation. When one rises, it's not unusual to see the other fall.
But over long periods, those two asset classes can move together. From 1981 to 2020, the 10-year Treasury yield dropped from nearly 16% to less than 1%. This was the primary catalyst for the 60/40 portfolio. And it worked because both sides of the equation were delivering gains.
Details
But in 2022, the relationship did the complete opposite. Inflation skyrocketed, long-term yields soared, and stock prices entered a new bear market. For the first time, both long-term Treasuries and the S&P 500 (SNPINDEX: ^GSPC) fell by more than 20% at the same time. Many people declared the 60/40 portfolio dead.
Source
Originally published at www.fool.com.