Chart: Navigating (almost) uncharted territory with correlations

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What should investors do when established historical relationships between asset classes aren’t working?

  • Year to date, 2022 has been a challenge for investors. It’s the first time since 1994 that there’s been a calendar-year period of negative returns for both stocks and bonds. 

 

  • This can leave investors scrambling for solutions — traditional asset class hedges aren’t working and established historical relationships between asset classes aren’t holding up.

 

  • It’s important to remember that real world events can impact correlations. Drivers like increased volatility and inflation can change the relationships between different asset classes. 

 

  • An active approach can help adjust asset allocation decisions to changing correlation relationships. And it can be essential to successfully navigating this environment.

 

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