JPMAM's Mandel: Why holding duration is not the shock-absorber it once was

A 'mixed blessing' for multi-asset investors

clock • 3 min read

Policy induced spikes are pushing stock-bond correlations into positive territory - that means holding duration is not the shock absorber it once was, writes Ben Mandel, global multi-asset strategist at JP Morgan Asset Management.

Multi-asset investors are increasingly asking this question: is holding duration a good hedge in a reflationary world?  In other words, as nominal global growth reflates and the balance of global risks even out, will portfolios benefit less from the diversification features of bonds?  To answer that, we have to look at whether stock-bond negative correlations are holding up as we move on from the lower for longer rate regime. The ‘normal' correlation between stocks and bonds is about -0.5, but that relationship has been punctuated by spikes into positive territory. The negative rel...

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