Why Are Stocks and Bonds Moving in Unison?

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Aug. 27 (Bloomberg) – Bloomberg’s Lisa Abramowicz reports on the current relationship between stocks and bonds. She speaks with Matt Miller on Bloomberg Television's “In The Loop.” (Source: Bloomberg)

At the same time together.

To explain this new theory is lisa abramowicz.

What is going on here?

These are supposed to be negatively and inversely correlated.

Initially people thought bonds would gain in times of turmoil and stocks would lose.

In 2008 when the world was just -- collapsing, bonds gave u.s. 40% versus 30% plunge in the s&p 500. these asset classes are now moving together for the past couple of quarters.

We thought that was because one market is wrong and the other market is right.

We are asking investors, is the bond market smarter and typically people think of that way and it is showing there are real problems, for example, in geopolitics or is the stock market smarter shrugging these off and continuing to run?

In income analyst for over 20 years has a different theory.

He says it is not one is right and one is wrong, but both are responding to the stimulus that has been ongoing.

It is both generating economic growth which is positive for stocks, suppressing yields on bonds.

What could cause rates to rise?

He said inflation.

We don't see it right now.

There's not a high degree of inflation.

The ends -- the expectation of inflation is not high.

If it picks up, it is good for stock and bonds.

If you ever up at spike increases, people are not going to be as excited to buy things.

It will slow the economy.

At the same time, the fed finishing up its tv policy would start raising interest rates to fight the inflation.

This is the theory going forward that stocks and bonds could basically both the hurt by rising rates.

Sort of of the capital what you wish for.

The federal reserve has been prolonging the stimulus efforts to sort of spur inflation and get the economy going.

The issue is, if inflation does pick up -- it doesn't have to pick up that much.

It could be 2.5% or 3%. that could significantly to real stock and bonds rallies.

-- derail stocks and bonds rally.

This is sort of something to keep an i on if people think they can hedge their stock bets with their bond bets.

You thought being a fixed income reporter was going to be boring, and it is so exciting.

It is cool.

"market makers" is next.


This text has been automatically generated. It may not be 100% accurate.


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