Recent history has been humbling for nearly every corner of portfolio management. There are exceptions, of course. Several managed futures ETFs, for example, have been relatively stable in the recent market correction. But extreme stress has afflicted most corners of the financial markets, which in turn has unleashed unexpected challenges for many portfolio strategies.
The Financial Times highlights how recent events have raised new questions about standard asset allocation strategies.
For much of the past century, the building blocks of most investment portfolios have been a combination of riskier stocks and steadier, safer bonds. Like a see-saw, one typically rises if the other falls, smoothing returns and offering
But over the past decade, this relationship has broken down. Bond yields have sagged as their prices have risen alongside equities, producing healthy gains but limiting how much protection bonds can offer in downturns. The recent market chaos unleashed by…