Are bonds the market crash ‘shock absorbers’ they once were?

Disturbing signs suggest bonds and shares might move in the same direction.

Summary: Conventional wisdom suggests any fall in shares is largely offset by a rise in bonds, but there are signs that bonds and shares might move in the same direction. Investors could make sure their portfolio combines listed and unlisted assets, and shorten the duration of any bond portfolio as shorter dated bonds are less susceptible to capital loss if bond rates keep rising.

Key take-out: Keep a diversified share portfolio and consider a conservative trend or momentum trading strategy, which works better than an active strategy except in a flash crash.

Key beneficiaries: General investors. Category: Shares.

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