A simple rolling 25-day correlation between the S&P 500 index and the iShares 20+ Year Treasury Bond TLT exchange-traded fund this week fell to -0.1635, the most negative since June of 2023.

Figure 3: Periods of negative stock/bond correlation historically have seen less severe underperformance in a typical 60/40 portfolio Source: Bloomberg data and PIMCO calculations as of October 2024.

Further, he says if the world continues to shake off fears of trade wars and Brexit, then correlations between stocks and bonds could hit zero, and even become positive. “In prior overheating episodes ...