A Deep History of the Bond-Equity Relationship and Inflation

Juan Sampieri and Andy Sparks

June 28, 2022

Major stock sell-offs (defined as monthly returns below -2%) since September 2021 coincided with sell-offs in Treasurys. Looking deep into market history between 1971 and 1999 reveals many periods when bond and stock returns tended to move in the same direction. A striking example of this occurred during the period of stagflation from 1978 to 1982, a period characterized by higher inflation and slower and sometimes negative economic growth in the U.S., when large equity sell-offs often coincided with sell-offs in Treasurys.We invite you to use the interactive chart to highlight different time periods and see when bonds provided stronger (or weaker) diversification against losses in the equity market.

How to interact with this plot: Click and drag on the inflation sub-chart to highlight a time period. Select the equity-loss threshold at the bottom of the chart. Hover the mouse over the charts to see more details. This chart is updated daily.

Treasury return is computed using the 10-year constant-maturity Treasury yield, retrieved from the Federal Reserve Bank of St. Louis’s FRED database. Equity return is from the MSCI USA Index. U.S. realized inflation is the personal-consumption-expenditures price index, excluding food and energy, from the U.S. Bureau of Economic Analysis.