Investment insights from Capital Group
Unlike other recent equity corrections, bonds buckled alongside equities in 2022
Source: Morningstar. As of 31 October, 2023. Correlation is a statistic that measures the degree to which two variables move in relation to each other; a positive correlation implies that they move together in the same direction while a negative correlation implies that they move in opposite directions. Correlation figures based on returns data for the S&P 500 Index versus the Bloomberg US Aggregate Index. Correlation shown for the eight equity market correction periods since 2010. Corrections are based on price declines of 10% or more (without dividends reinvested) in the unmanaged S&P 500 with at least 75% recovery. Dates for correction periods are as follows: Flash crash, April 2010 to July 2010. US debt downgrade: April 2011 to October 2011. China slowdown: May 2015 to August 2015. Oil price shock: November 2015 to February 2016. US inflation/rate scare: January 2018 to February 2018. Global selloff: September 2018 to December 2018. COVID-19 pandemic: February 2020 to March 2020. Historic inflation and rate hikes: January 2022 to October 2022. Past results are not predictive of results in future periods.
Resilient growth and still elevated inflation have adjusted the Fed’s rate expectations
Source: Federal Reserve. As of 13 November, 2023. Year-end projections pulled from Federal Open Market Committee statements released on 14 December, 2022; March 22, 2023; 14 June, 2023; 20 September, 2023. Fed funds rate shown is the upper limit of the fed funds rate.
The core bond benchmark outpaced stocks and riskier bonds amid equity turmoil
Source: Morningstar. As of 31 October, 2023. Averages were calculated by using the cumulative returns of the Bloomberg US Aggregate Index versus the S&P 500 Index and the Bloomberg US High Yield 2% Issuer Capped Index during the eight equity market correction periods since 2010. Corrections are based on price declines of 10% or more (without dividends reinvested) in the unmanaged S&P 500 Index with at least 75% recovery. The cumulative returns are based on total returns. Ranges of returns for the equity corrections measured: Bloomberg U.S. Aggregate Index: –14.38% to 5.35%; S&P 500 Index: –10.1% to –33.79%; Bloomberg US High Yield 2% Issuer Capped Index: –20.76% to –1.45%. There have been periods when the Bloomberg US Aggregate Index has lagged the other indices, such as in rising equity markets. Past results are not predictive of results in future periods.
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