(The opinions expressed here are those of the author, a columnist for Reuters.)
ORLANDO, Florida – The positive correlation between U.S. stocks and bonds is the strongest in years, if not decades, and whether it lasts hinges on just how the economy touches down this year.
There is no clear agreement on how the “hard,” “soft” – or even “no” – landing scenarios are defined, so it is reasonable to assume that the path for stocks and bonds in the three eventualities is fuzzy too.
That’s especially true of the “soft” and “no” landing scenarios. A “hard” recession, large-scale job losses, severe credit tightening and market volatility would almost certainly be an environment in which safe-haven U.S. Treasuries rise in value and Wall Street stocks head south.
In this scenario, the correlation between stocks and bonds will quickly turn negative. But – right now – it’s also seen as the least likely of the three outcomes to play out.
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