Back to View all
Chart of the week

As Treasury yields rise, so has stock-bond correlation

Stock-bond correlation sits at a 75-year high today as the era of easy diversification may be over amid a higher-for-longer rate environment.

Subscribe to the Chart of the week newsletter
February 28, 2025 | 2 minute read

Stock-bond correlation and the 10-year U.S. Treasury yield

Line chart showing the 30-day rolling correlation between the S&P 500 and the Bloomberg U.S. Aggregate Bond Index, paired with the 10-year Treasury yield, as stock-bond correlations have moved in tandem over the past year. Over a longer period, the rolling 3-year correlation between stocks and bonds began to spike in early 2002, as the Fed began to aggressively hike rates, and today sits at a 75-year high of 0.67.

Source: FS Investments, Bloomberg Finance L.P, as of January 31, 2025. Stock/bond correlation is represented by the 30-day correlation between the S&P 500 and the Bloomberg U.S. Aggregate Bond Index.

  • Investor sentiment has turned increasingly negative in 2025 driven by fears of slowing economic growth and a growing acceptance that rates may stay higher or longer, a belief that has been exacerbated by surging inflation expectations.
  • As investors adjust to a higher-for-longer rate environment, the era of easy diversification (where fixed income acted as a ballast to volatile equities) may be over. An elevated rate environment has historically led to higher correlation between stocks and bonds.
  • The chart shows the 30-day rolling correlation between stocks (S&P 500) and bonds (Bloomberg U.S. Aggregate Bond Index), along with the 10-year Treasury yield, which have moved in tandem over the past year.1
  • The rolling 3-year correlation between stocks and bonds began to spike in early 2002, as the Fed began to aggressively hike rates, and today sits at a 75-year high of 0.67.1
  • Against this backdrop, the potential for alternative investments as a source of diversification appears particularly compelling.

  • FS Investments, Bloomberg Finance L.P, as of January 31, 2025. Stock/bond correlation is represented by the 30-day correlation between the S&P 500 and the Bloomberg U.S. Aggregate Bond Index.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Print this page Email this page

Related Insights

Chart of the week

Trade uncertainty registers parabolic growth

Tariffs have been mentioned nearly 1,000 times on Q1 earnings calls, driving volatility and sowing uncertainty across markets.

Chart of the week

Middle market resilience amid trade uncertainty?

The private U.S. middle market may represent a compelling opportunity as companies in this sector face less disruption from global supply chains.

Chart of the week

Public market sentiment cools as challenges mount

Individual and professional investors have grown notably more bearish in February. The U.S. middle market may represent a reason to be bullish.

Search our site