The Way We Live Now
Wednesday, September 7th, 2016 Categories: Correlation, Diversification, Global Equities, Government Bonds
Positive correlation meets asset allocation theory
Most of the major developed equity markets, except the US, are positively correlated with their local government bond market. This makes portfolio diversification very difficult, but the basic conclusion is that if you think government bonds are going to fall, you should expect equities to fall further.