The author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his own.You’d be forgiven for thinking the worst two-quarter period for stock markets since 2009 had investors running for the hills - but you’d be wrong.
But the persistent demand for stocks amid serial political and economic shocks has surprised many nonetheless. A big question now is whether the second half of the year sees asset allocation flipped as recession worries replace inflation as the dominant narrative and the search for peak interest rates rebalances the savings mix back to bonds.
What’s more, Schroders strategists point out that the risk reduction provided by 60/40 funds comes mostly from the lower volatility of bonds rather than their negative correlation per se - with equity portfolios twice as volatile historically. The main reason it cites is that the top 10% of the wealthiest U.S. households holds an “astounding” 89% of that combined household equity position - and high inflation makes little or no difference to their income of wealth.