Bonds and stocks may be getting back to their usual relationship, a plus for investors with a traditional mix of assets in their portfolios amid fears that the U.S. faces a recession this year.
“The bottom line is the correlation now has shifted back to a more traditional one, where stocks and bonds do not necessarily move together,” said Kathy Jones, chief fixed-income strategist at Charles Schwab, in a phone interview. “It is good for the 60-40 portfolio because the point of that is to have diversification.”
That classic portfolio, consisting of 60% stocks and 40% bonds, was hammered in 2022. It’s unusual for both stocks and bonds to tank so precipitously, but they did last year as the Federal Reserve rapidly raised interest rates in an effort to tame surging inflation in the U.S.
While inflation remains high, it has shown signs of easing, raising investors’ hopes that the Fed could slow its aggressive pace of…
