62% of trading days see stocks and bonds move in the same direction, US Treasury's safe-haven appeal is fading

According to Golden Ten Data APP, Jeff Weniger, Chief Investment Strategist at Corgi Invest, posted on social platform X that out of the 100 trading days ending November 10, the S&P 500 Index and 30-year US Treasury Bonds moved up and down together on 62 trading days. This data indicates that the effectiveness of US stocks and long-term bonds as a hedge has significantly diminished, whereas investors have traditionally relied on these two types of assets to buffer portfolio volatility.

Data show that the indicator tracking the synchronous movements of the S&P 500 Index and 30-year US Treasury Bonds recently reached about 70%, before falling back to 62%. This indicator measures the proportion of days in the past 100 trading days where both asset classes rose or fell together.

Historical data dating back to 1978 show that this relationship has changed significantly over time. This indicator dropped to just above 20% around 2011 and remained mostly between 30% and 40% during the mid-2010s, at times dipping to the mid-20% range.

For most of the period from 2017 to 2019, the indicator has hovered between roughly 35% and 55%; earlier decades also saw periods when stocks and bonds frequently moved together.

Weniger stated that the current pattern is similar to the 1980s and 1990s, when investors experienced extended periods of simultaneous rises or declines in stocks and bonds. In practice, when stocks and long-term Treasury Bonds fall at the same time, bonds' hedging ability against stock losses weakens, thereby reducing the benefit of diversification.

It is worth noting that the safe haven function of US Treasuries has recently returned at certain intervals. At the beginning of November, US tech stocks faced a sell-off, and safe haven capital quickly flowed into the bond market, pushing US Treasury yields down. However, the foundation for this wave of safe haven buying is not solid: investors remain highly sensitive to rate hike expectations and the market generally anticipates that a Federal Reserve rate increase in December is almost a certainty; after October's CPI exceeded expectations across the board, US Treasury yields increased. Industry insiders believe inflation remains the key variable in determining the direction of US Treasury yields, and US fiscal expansion will continue to disrupt the market over the medium and long term.