HSBC generated a helpful chart on the correlaiton when inflation is higher than 2.5%. The Fed will not, or cannot, get inflation back to 2%, so we expect the stock-bond correlation to remain positive. This means that there should be an active search for diversifiers. It is unlikely that any hedge fund strategy beyond managed futures will generate negative correlation. Still, there is an opportunity to find strategies with low correlation and higher risk-adjusted returns than a bond portfolio.
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