Positive Stock-Bond Correlation: Prospects & Portfolio Construction Implications

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Portfolio Research

Positive Stock-Bond Correlation: Prospects & Portfolio Construction Implications

By Xiang Xu — Mar 29, 2024

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Develop an immersive 3D ribbon graph that visualizes the correlation between two undisclosed forex pairs, with twisting and flowing ribbons indicating price relationships. Generative AI

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As part of PGIM Multi-Asset Solutions' ongoing research on portfolio construction, we have explored the macro drivers, global linkages, and portfolio construction implications of stock-bond correlation in a series of papers dating back to 2021. With US stock-bond correlation having now turned positive, in this paper we discuss which elements of the current economic landscape could provide support for an extended period of positive stock-bond correlation, we review the portfolio construction implications of positive correlation, and we assess what current stock and bond valuations may mean for forward performance.

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By Xiang Xu

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