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Stock-Bond Correlation Shift: Is the Traditional Hedge Broken?

Bond-stock correlation

Image source: IMF Financial Stability Report

The traditional stock-bond correlation has broken down, leaving investors and policymakers to rethink diversification strategies in a world of inflation, massive sovereign issuance, and changing monetary policy...

For decades, the negative correlation between stocks and bonds provided a reliable hedge for portfolios. When equity markets tumbled, bonds typically surged, cushioning the blow. However, recent market dynamics have seen both assets falling in tandem...


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