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Unstable Stocks-Bonds Return Correlations?

Steve LeCompte | | Posted in: Bonds, Equity Premium

Key Insight

Rolling 4-year S&P 500/10-year U.S. Treasury note monthly return correlation averaged about +30% before 2000 and about -30% afterward, alternating between positive and negative regimes (mid-1960s onward; descriptive, observational; not a trading test).

Should investors expect a negative correlation between stock market and bond market returns? In his February 2025 paper entitled "Rethinking the Stock-Bond Correlation", Thierry Roncalli examines the stocks-bond return correlation from theoretical and empirical perspectives, employing a 4-year rolling window of monthly returns for the latter. Using both long-term and recent returns, he finds that:

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