![]() ![]() Treasury yields so far this year, and if anything, it kind of feels like bonds and stocks have been moving up and down together on a day-by-day basis, all to the frustration of a well-allocated portfolio. In fact, there has been almost no statistical relationship at all between U.S. Trouble is, it hasn’t worked very well here in the post-COVID environment. This tendency of the investment world’s two primary asset classes to move in opposite directions of one another is the whole premise upon which the concept of diversification rests, and it’s often believed to be one of the most reliable relationships in modern finance. Ordinarily, when stocks drop you expect bonds to perform relatively well conversely, when stocks do well, your bond holdings are probably having trouble keeping up. Take, for example, the relationship between stocks and bonds. And at the same time, something about today’s environment is fundamentally different than in years past such that the implications of all this volatility just aren’t what they might have been during the bygone days when grandpa was saving for his retirement. Here’s what I mean: It’s certainly debatable whether markets are currently doing anything stupid (my take: the recent declines are not at all stupid given the uncertain economic backdrop,) but we’d probably all agree that from the perspective of those saving for retirement, the market’s misbehavior so far this year is at least obnoxious, if not downright mean. But you, on the other hand, probably got off scot-free because the parenting environment has changed so radically between then and now (at least through the wise old eyes of your grandfather.)Īt the risk of sounding like my own granddad, I think the market’s behavior through much of the first two quarters of 2022 probably qualifies for the phrase. The implication was that if your granddad had messed up as badly as you just did when he was a kid, there would’ve been consequences. ![]() If you were lucky enough to know your grandparents, you probably had that phrase fired at you like a verbal missile at one point or another during your childhood – usually when you were doing something stupid or obnoxious. Capital Markets Perspective brings you what to watch in the markets this week, published in partnership with Great-West Investments.
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