Buy-side modellers seek ‘Holy Grail’ of investing

When stocks and bonds fell in tandem this year, it sparked a debate about whether a lasting regime shift could be predicted

Risk 0618 Lead Story Stephen Lee NB Illustration
Stephen Lee, nbillustration.co.uk

Conventional wisdom holds that when stocks zig, bonds zag. The negative correlation between stocks and bonds has underpinned asset allocation models for nearly two decades, spawning the ubiquitous 60/40 portfolio and new variants, such as risk parity strategies.

But when the S&P 500 logged its first major decline of 2018, bonds fell in tandem, fuelling talk of a possible regime shift and raising questions about whether changes in the correlation are predictable.  

“One of the big issues at the

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