Ever since the Federal Reserve started talking about hiking rates at the start of 2022, stocks and bonds have been joined at the hip. Using the iShares 20+ Year Treasury ETF (TLT) as a proxy for the bond market, the correlation between its closing prices and the S&P 500 (using SPY) has been +0.79, implying a very strong correlation.  Visually, it’s also easy to see the relationship as the two sold off throughout most of 2022 and then bottomed out early in the fourth quarter.  From those lows through early April, the positive correlation between the two continued, but ever since then, the paths of the two ETFs have diverged.  Since April 6th, TLT is down 6.8% while the S&P 500 is up 2.7%.  As the sell-off in Treasuries has picked up steam in recent days, market watchers have been expecting stocks to start following suit.  Bulls, on the other hand, are hoping that this is the start of an amicable separation between the two.

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