Portfolio resilience is crucial at a time of elevated macro uncertainty.
Raising resilience
Stock-bond correlations in the U.S. and euro area, 2000-2019
Past performance is not a reliable indicator of current or future results.
Source: BlackRock Investment Institute, with data from Refinitiv Datastream, October 2019. Notes: The charts show the correlations between daily percentage moves for stocks and bonds over a rolling one-year period. The dot shows the correlation over the most recent 90 day period. For the United States, we use the MSCI USA index for stocks and the 10-year Treasury for bonds. For the euro area, we use MSCI Europe ex-UK index and the German 10-year bund. Indexes are unmanaged and not subject to fees. It is not possible to invest directly in an index.
Government bonds play an important role in building portfolio resilience – even at low yield levels. We see them as crucial diversifiers that can help offset the impact of equity selloffs in an environment of rising macro uncertainty. The charts above show the negative correlations between stocks and bonds. The more negative the correlation, the more they move in opposite direction and provide diversification. We prefer U.S. Treasuries for this reason. In Europe, German bunds are less effective shock absorbers as yields approach their perceived floor.
Market implication: Government bonds play an important role in building portfolio resilience – even at low yield levels.
Meet the authors
Jean Boivin
Head of BlackRock Investment Institute
Jean Boivin, PhD, Managing Director, is the Head of the BlackRock Investment Institute (BII). The institute leverages BlackRock’s expertise and produces proprietary ...
Elga Bartsch
Managing Director, Head of Macro Research of the BlackRock Investment Institute
Elga Bartsch, Managing Director, is Head of Macro Research of the BlackRock Investment Institute. Elga heads up economic and markets research of the Blackrock Investment ...
Mike Pyle
Chief Investment Strategist, BlackRock Investment Institute
Mike Pyle, CFA, Managing Director, is Global Chief Investment Strategist for BlackRock, leading the Investment Strategy function within the BlackRock Investment
Scott Thiel
Chief Fixed Income Strategist
Scott Thiel, Managing Director, is Chief Fixed Income Strategist for BlackRock and a member of the BlackRock Investment Institute (BII). He is responsible for developing ...
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