Chart of the week

Stock and bond volatility jump together

Volatility has escalated this year across stock and bond markets. This week’s chart looks at daily changes in the S&P 500 and the Agg.

May 20, 2022 | 2 minute read

Daily % changes: S&P 500 and Bloomberg Agg

Source: Bloomberg Finance, L.P., FS Investments, as of May 19, 2022. Bloomberg Agg refers to the Bloomberg U.S. Aggregate Index.

  • Stocks fell again this week as Walmart and Target followed up strong retail sales reports on Tuesday with disappointing Q1 earning results on Wednesday. The contrasting data points highlight the extraordinarily uncertain environment in which investors are operating today.
  • Since the start of this year, investors have been battling through a potent combination of volatility drivers – tightening monetary and fiscal conditions, unrelenting inflation, a war in Europe, and ongoing closures in China – that have accelerated as the year has progressed.
  • The significant macro uncertainties have driven market volatility notably higher. As the chart shows, stock and bonds’ daily movements were relatively mild in 2021 compared to this year, when it has been common for the S&P 500 to see moves of 2% or more.1 As expected, bond movement has been less extreme, yet volatility has clearly ticked up from 2021.
  • The chart highlights the breakdown in the traditional relationship between stocks and bonds as correlations have risen while returns are deeply negative across both – the S&P is down about -17% YTD while the Agg is down -9.5%.1
  • Amid a volatile market with no clear end in sight, investors may be wise to remain focused on companies that have the potential to thrive in a slowing economy while also emphasizing investments with limited correlation and downside protection potential.

  • Bloomberg Finance, L.P., FS Investments, as of May 19, 2022. Bloomberg Agg refers to the Bloomberg U.S. Aggregate 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.

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