Portfolio Construction

Positive Stock-Bond Correlation: Prospects & Portfolio Construction Implications

By Xiang Xu — Mar 29, 2024

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

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.

References

By Xiang Xu