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Via BofAML:
Three threats to bonds
Typically, when stocks decline, we see investors rushing to buy US Treasury bonds and other safe assets. This tendency of bonds to rally when stocks drop – the negative correlation between bonds & equities – is the basis for a conventional allocation of 60% to stocks and 40% to bonds. There is a diversification benefit from bonds.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.