Fixed income should resume diversification role

Rolling one-year correlation of S&P 500/US 10-year Treasury and US tightening cycles

When the Fed tightens, fixed income correlations tend to go up and stocks tend to go down. This correlation tends to reverse itself when the Fed stops tightening, as they’re expected to do soon. Going forward, fixed income should play a better diversifying role in client portfolios.


Past performance is not a guarantee of future results. Diversification does not ensure a profit or protect against a loss in a declining market. Source: Datastream | Chart data: 30 June 1988 – 19 June 2019