NTSX - NTSX: Stock-Bond Correlation Suggests Caution But Reason For Optimism Ahead

2024-04-21 08:06:29 ET

Summary

• Equities and fixed income have been moving in tandem as inflation fears cast doubt on whether there will be any Fed rate cuts in 2024.
• The WisdomTree U.S. Efficient Core Fund ETF offers potential benefits for index investors when Treasury securities offset moves in the stock market, but we aren't seeing that today.
• NTSX has produced strong risk-adjusted returns in the past and offers tax advantages for investors, but recalcitrant inflation negates the ETF's diversification benefit for now.
• I highlight key price levels to watch and urge investors to be on the lookout for diverging price action between the S&P 500 and intermediate-term Treasurys.

Investors in balanced funds might be feeling a bit of PTSD from 2022 so far this year. Through April 19, the domestic bond market is down by more than 3% (total return) while the S&P 500’s advance has been trimmed to just 4.5%, dividends included. Indeed, fixed-income prices and equities are moving in tandem, continuing a trend that began when inflation took off more than two years ago. ...

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