Great changes in the global fixed income sector, affecting risk diversification strategies🤔
In fact, the global developed market fixed income sector has suffered unprecedented upheavals, pushing equity-bond correlations to their highest levels in nearly 20 years, completely eliminating the risk diversification effect that traditional 60/40 investment portfolios rely on. To make matters worse, the era of FOMO in capital markets, where investors have led to more indiscriminate risk-taking and excessive risk exposure through volatility selling and other leverage operations, has reduced the realized volatility of standard 'risk parity' portfolios Stock and bond volatility is higher than that of their underlying stocks and bonds.