Today’s Chart of the Day comes from S&P Dow Jones Indices.
One of the first investment lessons my father taught me was that when stocks go down, bonds go up, and vice versa.
This relationship, measured by a positive correlation measured in the chart, has held for a long time; however, this year the relationship broke down and has headed into negative territory.
The laws of finance are not broken, and the relationship is still there; however, it is being masked by increased inflation which hurts the prices of stocks and bonds.
P.S. I still remember Black Monday in 1987. At the age of 13, the 100 shares of stock I owned, bought from mowing lawns, went down to pennies. I bought another 1,000 shares for $100 with the dream of getting rich when the market came back. However, that company eventually went out of business. I still have the stock certificate and the “should have been diversified” lesson with me today.