Fidelity Timmer: "60/40 only works when stocks and bonds are negatively correlated"

Fidelity Investments' global macro director Jurrien Timmer said in an October 26 market commentary that the correlation between equities and bonds has weakened but remains positive, undermining the core premise of the classic 60/40 portfolio, which only cushions losses when stocks and bonds move inversely. Timmer attributed the shift to diverging performance between AI-related and non-AI stocks and to investor attention rotating from rate concerns toward growth worries. The 60/40 mix, which allocates 60% to equities and 40% to bonds, assumes bond prices rise when stocks fall; when both assets decline together, that buffer weakens. The persistence of a positive stock-bond correlation matters because it challenges the diversification math underpinning trillions in balanced-fund allocations. What to watch next is whether the correlation turns negative as growth fears displace rate anxiety, and whether AI-linked concentration in equity indexes keeps driving the relationship.