Special Report

Have US Treasurys Lost Their Shine In Asset Allocation?

08 Feb 2023

by Xiaoli Tang, Associate Strategist

This is the first of two Special Reports aiming to answer client questions in response to the recent dramatic changes in stock-bond correlations. In this report we focus on what role US Treasurys have played since 1872, how the current regime shift in stock-bond correlation compares to 150-years of history, and how it will impact asset allocation going forward.

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Contents

Executive Summary / Insight
Q1: Were US Treasurys Always A Good Diversifier To Equity Risk For Long-Term Investors?
Q2: Did US Treasurys Always Generate Positive Returns During Recessions?
Q3: US Government Bond Yields Have Risen Fast From Their Historical Lows. What Can We Learn From The 1941-1981 Rising Yield/Rising Inflation Period?
Q4: How Did The US Stocks-Treasurys Correlation Change Over Time?
Q5: How Would A Positive Stock-Bond Return Correlation Impact 60/40 Portfolio Return, Volatility, And The Sharpe Ratio?
Q6: Does Empirical Evidence Support Your Assumptions In Part 5?
Footnotes