bonds aren’t a diversifier as correlation rises.
AGG’s bond exposure is no longer a reliable diversifier—rising bond-stock correlation and real-return erosion raise portfolio volatility.
Bond volatility and real-return drag look set to worsen as central bank/Treasury actions reduce real bond returns. With bonds now positively correlated with stocks, AGG can add volatility instead of dampening drawdowns, so the diversifier role from the prior “great moderation” era has faded.
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