Analysts at Brown Brothers Harriman explained that both ways of calculating the correlation between stocks (S&P 500) and yields (10-year) have converged and are telling investors essentially the same thing.
"Despite the equity swoon and the firmness of US yields, the relationship between the two markets does not appear unusual. Interestingly, the correlation on a percentage change basis is somewhat greater of the past 30 days (0.46) than the past 60 days (0.37)."
"The same is not true about the correlation done on the level of the two. There the 30-day correlation has become inverted. Over the past two years, this is the ninth time that the 30-day correlation has become negative."
"When it has become inverted, the inversion has tended to be deeper and last mostly two or three weeks, though there were a couple of times where the 30-day inversion lasted closer to two months."
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