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Risk Parity Is Slammed as Bonds and Stocks Move in Lockstep

  • Strategy made famous by Dalio faces worst week since Covid hit
  • Stocks’ 60-day correlation to bonds rises to highest since ‘99
Updated on

A quantitative strategy with $400 billion in play is headed for its worst week since the pandemic hit after inflation fears rocked assets across the spectrum.

A benchmark of risk parity, the systematic investment method pioneered by Ray Dalio, has dropped 3% in the past four days. The strategy, which seeks to spread risk by allocating to different assets based on their volatility, has been upended as investments like stocks and bonds increasingly move in lockstep.