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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.
