Global Fixed Income Woes Challenge Traditional 60/40 Portfolio Diversification🤔
Indeed, the unprecedented destruction in global DM fixed income has spiked equity-bond correlations to nearly 20 year highs, effectively nullifying the risk diversification benefits of your standard 60/40 portfolio. To make things worse, an era of capital markets FOMO had led to indiscriminate risk-taking and overexposure via volatility selling and other leveraged measures, leading to your standard 'risk parity' portfolios having how trading with a higher realized volatility than the underlying stock and treasury components.
#macro #6040Portfolio #FOMO #volatility #leveragedRisk