Stocks and Bonds in Lockstep

Investment watchers may have noticed that stocks and Treasury bills have been moving pretty much in lockstep over the past couple of months. How close? Over the past 60 trading days, the correlation between movements in the S&P 500 and 10-year Treasury rates has been 0.84, out of a maximum of 1.00. This is the strongest such linkage between those two figures since 1962.

The next question: Is this an interesting bit of trivia, or is there something of more significance to this? Well, the last time the correlation between stocks and T-bills was close to this level was in 2002, at the beginning of the bull market of the last decade. You can make of that what you will.

What is certainly means is that investors lately have been following the ups and downs of the overall economy more than they have the values of different sectors or the fundamentals of individual stocks. The shaky situation in Europe and the sluggishness in the unemployment figures continue to be of great importance to investors, moreso than the concerns affecting specific stocks.