JPM's Shah: A macro guide to the late cycle

Asset class correlation still remains close to average

Late in the business cycle, when volatility tends to increase, asset class correlations come under increased scrutiny.

After a big spike in cross-asset correlation in the wake of the financial crisis, with many asset classes moving in lockstep, investors enjoyed four years of relatively low correlation between 2013 and 2017—a positive environment for building diversified portfolios. Since the start of the year, investors have seen some jumps in asset class correlation but ultimately it remains close to average, meaning diversification in this dimension still works for traditional balanced portfolios. Asset class behaviours However, while diversification is working for now, it's important to build r...