By Omnigence Asset ManagementLast updated
This report examines how inflation upends the long-held assumption that bonds always hedge equities. Drawing on historical S&P 500 and 10-year Treasury data, the report shows that when inflation rises above roughly 5 percent, stock-bond correlations turn positive—meaning both asset classes can decline together. The analysis highlights how low, moderate, high-inflation, and stagflation regimes each affect diversification, revealing potential simultaneous drawdowns of 20–40 percent. Investors relying on traditional 60/40 portfolios must reconsider their risk frameworks.