Diversification working better than ever

As the 'reflation' phase sets in, diversifying across asset classes is a crucial means of riding out volatility

The contrasting way stocks and bonds reacted to Bank of England plans to print money carries an important message about diversification. Government bonds soared, recording their largest daily gain for 17 years. Distracted by other events, shares fell. Many people believe the only thing that rises in a bear market is correlation. However, UK stocks and gilts have moved in opposite directions more often than not over the last ten years and commodities dance to their own tune, sometimes moving with stocks, sometimes against. Moreover, every time a bull run in one asset class comes to a hal...