Skip to main content
PGIM LogoPGIM Logo
    • Megatrends
    • Annual Best Ideas
    • Quarterly Market Outlooks
    • Market Events
    • Thought Leadership
    • Events & Webinars
    • ESG Investing
    • Investing in Alternatives
    • Investing in Emerging Markets
    • Clients We Serve
    • Defined Contribution
    • Financial Advisors
    • Institutional Relationships
    • Institutional Advisory & Solutions
    • Global Locations
    • Contact Us
    • Overview
    • Leadership
    • History
    • Diversity, Equity & Inclusion
    • Global Locations
    • Jennison Associates
    • PGIM Fixed Income
    • PGIM Private Capital
    • PGIM Real Estate
    • PGIM Quantitative Solutions
    • PGIM Portfolio Advisory
    • PGIM Investments
    • Montana Capital Partners
    • PGIM DC Solutions
    • Contact Us
    • Subscribe
    • Request for Information
    • Careers at PGIM
    • Job Opportunities
    • All News
    • Press Releases
    • In the News
    • Facts & Figures
    • Media Contacts
Stock Bond Webinar Banner
Webinar

Webinar Replay - Stock-Bond Correlation: A Global PerspectiveWebinarReplay-Stock-BondCorrelation:AGlobalPerspective

With Bruce Phelps & Dr. Noah Weisberger — Jul 28, 2022

40 min watch

Share
  • Mail
  • LinkedIn
  • Twitter
  • Copy URL

Share

For most of their careers, asset allocators have invested in a negative stock-bond correlation world. When stocks fall, sovereign bonds rising generally rise in value – providing a hedge against equities within a diversified portfolio. However, stock and bond prices have recently moved in tandem, as slower growth and interest rate hikes serve as headwinds for both asset classes. In this webinar, Noah Weisberger and Bruce Phelps of PGIM Institutional Advisory & Solutions examined the historical pattern of stock-bond correlation across the globe and investigated various actions that asset allocators could take to mitigate risk from a shift in stock-bond correlation. The following are highlights from the discussion.

  • Exploring the history of the stock-bond relationship: PGIM IAS’ research highlights that negative correlation between stocks and bonds is not necessarily the norm. In fact, there have been persistent multi-year periods of positive stock-bond correlation. For example, investors saw around 35 years of positive correlation from the mid-1960s until 2000. This correlation pattern seems to have returned in late 2021 with equities beginning their descent into a bear market and bonds continuing to sell off as well. As new IAS research shows, changes in stock-bond correlation in other developed markets (DMs) have tended to track changes in the U.S. correlation.
  • Relative influence of local and global factors: Stock-bond correlation can be explained, in part, by local policy and macroeconomic drivers. However, given the similarities between correlations in the U.S. and other DMs, it becomes clear that there is a global story as well. IAS found that a single global factor can explain about two-thirds of country-specific stock returns, with bond returns similarly global. So, for CIOs thinking about the likely path of stock-bond correlation, keep in mind that macro forces at play are not all local and not all global, but a mix of both. Therefore, an increased risk of positive stock-bond correlation in the U.S., driven by domestic fiscal and monetary policy, would simultaneously increase the risk of positive stock-bond correlation in other DMs.
  • Considering alternative hedges: When stocks and bonds move in tandem, neither U.S. bonds nor other DM bonds have served as a reliable hedge for U.S. stocks. Unfortunately, there are no clear hedging alternatives. Some evidence suggests commodities have a negative correlation with stocks, on average; for instance, oil and gas, as well as gold, have typically moved in the opposite direction to equities when US bonds have not been a hedge for equities. But this relationship has only been true a little more than 50% of the time. Asset allocators must also consider that commodities exhibit greater volatility than bonds, making them a less reliable way to dampen overall portfolio volatility.
  • Planning for the future: A shift from positive to negative stock-bond correlation would change the investing landscape. What can asset allocators do to mitigate risk in a world of higher volatility? As detailed in a forthcoming research paper, taking an agnostic approach – in other words, assuming zero correlation between stocks and bonds – may be a prudent path as the future reveals itself.
Download Webinar Slides
Explore Research
Global Stock-Bond Correlation

Explore global stock-bond correlations, their relationship to each other, and their common macroeconomic drivers.

Explore Research

  • By Bruce PhelpsManaging Director, Head of Institutional Advisory & Solutions, PGIM
  • By Dr. Noah WeisbergerManaging Director, Institutional Advisory & Solutions, PGIM

You May Also Like

Industry Insights: Hidden cost of early access programs
In the News

Industry Insights: Hidden cost of early access programs

Jul 20, 2022

The possibility of future early access programs compels CIOs to adjust asset allocations today to make sure they have enough liquidity.

Inflation vs Stagflation - How do Real Asset Portfolios Differ?
Real Assets

Inflation vs Stagflation - How do Real Asset Portfolios Differ?

Jun 22, 2022

Be wary of economic growth sensitivities in your real asset portfolios if the economic environment were to be stagflationary.

Webinar – US Stock-Bond Correlation: What Are the Macroeconomic Drivers?
Institutional Advisory & Solutions

Webinar – US Stock-Bond Correlation: What Are the Macroeconomic Drivers?

May 13, 2021

In our on-demand webinar, PGIM experts to explain their research findings, explore how macroeconomic drivers could shift stock-bond correlation.

  • Insights

    • Megatrends
    • Annual Best Ideas
    • Quarterly Market Outlooks
    • Market Events
    • Thought Leadership
    • Events & Webinars
  • Investment Themes

    • ESG Investing
    • Investing in Alternatives
    • Investing in Emerging Markets
  • Clients

    • Clients We Serve
    • Defined Contribution
    • Financial Advisors
    • Institutional Relationships
    • Advisory Solutions
  • About

    • Overview
    • Leadership
    • History
    • Diversity, Equity & Inclusion
    • Global Locations
    • Contact Us
    • Subscribe
    • Request for Information
  • Careers

    • Careers at PGIM
    • Job Opportunities
  • Newsroom

    • All News
    • Press Releases
    • In The News
    • Facts & Figures
    • Media Contacts
PGIM Logo
  • Terms & Conditions
  • Privacy Center
  • Accessibility Help
  • UK Regulatory Disclosures
  • Netherlands Regulatory Disclosures
  • Cookie Preference Center

For Professional Investors only. All investments involve risk, including the possible loss of capital.

This material is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. PGIM is the principal asset management business of Prudential Financial, Inc. and a trading name of PGIM, Inc. and its global subsidiaries. PGIM, Inc. is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not imply a certain level of skill or training.

The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary.    

In the United Kingdom, information is issued by PGIM Limited with registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR. PGIM Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom (Firm Reference Number 193418). In the European Economic Area (“EEA”), information is issued by PGIM Netherlands B.V. with registered office: Gustav Mahlerlaan 1212, 1081 LA Amsterdam, The Netherlands. PGIM Netherlands B.V. is, authorised by the Autoriteit Financiële Markten (“AFM”) in the Netherlands (Registration number 15003620) and operating on the basis of a European passport. In certain EEA countries, information is, where permitted, presented by PGIM Limited in reliance of provisions, exemptions or licenses available to PGIM Limited under temporary permission arrangements following the exit of the United Kingdom from the European Union. These materials are issued by PGIM Limited and/or PGIM Netherlands B.V. to persons who are professional clients as defined under the rules of the FCA and/or to persons who are professional clients as defined in the relevant local implementation of Directive 2014/65/EU (MiFID II). In Italy, information is provided by PGIM Limited authorized to operate in Italy by Commissione Nazionale per le Società e la Borsa (CONSOB). 

In Japan, information is provided by PGIM Japan Co., Ltd. (“PGIM Japan”) and/or PGIM Real Estate (Japan) Ltd. (“PGIMREJ”).  PGIM Japan, a registered Financial Instruments Business Operator with the Financial Services Agency of Japan offers various investment management services in Japan.  PGIMREJ is a Japanese real estate asset manager that is registered with the Kanto Local Finance Bureau of Japan.

In Hong Kong, information is provided by PGIM (Hong Kong) Limited, a regulated entity with the Securities & Futures Commission in Hong Kong to professional investors as defined in Section 1 of Part 1 of Schedule 1 of the Securities and Futures Ordinance (Cap. 571). In Singapore, information is issued by PGIM (Singapore) Pte. Ltd. (“PGIM Singapore”), a regulated entity with the Monetary Authority of Singapore under a Capital Markets Services License to conduct fund management and an exempt financial adviser. This material is issued by PGIM Singapore for the general information of “institutional investors” pursuant to Section 304 of the Securities and Futures Act 2001 of Singapore (the “SFA”) and “accredited investors” and other relevant persons in accordance with the conditions specified in Section 305 of the SFA. In South Korea, information is issued by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean qualified institutional investors on a cross-border basis.   

Prudential Financial, Inc. (“PFI”) of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. 

You are viewing this page in preview mode.

Edit Page