Treasury Bonds No Longer Provide A Hedge To The Stocks In Your Portfolio

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Markets More: Correlation Treasury Bonds No Longer Provide A Hedge To The Stocks In Your Portfolio Walter Kurtz, Sober Look Jun. 21, 2013, 7:53 AM 1,021 1 Tweet!function(d,s,id){var js,fjs=d.getElementsByTagName(s)[0];if(!d.getElementById(id)){js=d.createElement(s);js.id=id;js.src="//platform.twitter.com/widgets.js";fjs.parentNode.insertBefore(js,fjs);}}(document,"script","twitter-wjs");EmailShare on Tumblr

The last time short term correlation between treasuries and US equities turned positive was at the beginning of Fed's QE2 in 2010. At the time both equities and treasuries rallied in anticipation of the new stimulus. Now we are back to positive correlation, except this time the reverse is taking place (at least in terms of expectations). Treasuries no longer provide the hedge for equities portfolios that the markets have become accustomed to (see discussion). It may take another crisis to send the correlation back into negative territory.

Sober Look

As social unrest escalates, Brazil investors flee Correlation between equities and treasuries turns positive Update on China's funding situation: throwing out the baby with the bath water $('.icon-tooltip').tooltip();

 

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The correlation has turned positive.

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