Flights to Safety in the Stock Market

The correlation between stocks and treasury bonds is positive most of the time, but it goes negative in recessionary periods. And when you think about it, that's what we're really interested in: We don't care if treasuries are negatively or positively correlated with stocks as long as our portfolio is going up. The Cuban Missile Crisis, a credit crunch in the 60s, recessions in the late 60s and 73, 74 recessions in early 80s were all spikes where correlations went negative. When do you see this switch flip? I'm not sure there's any definitive time period, but we actually saw that happened in the past three weeks here,.