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Oil Rally Tests Diversification Strategy

In this episode, Serena Tang explains how a surge in oil prices could undermine the traditional negative correlation between stocks and bonds that investors rely on for diversification. She outlines how the pandemic-era co‑sell‑off of equities and bonds was driven by a mismatch of growth and inflation, and warns that a sustained oil shock could recreate a stagflation scenario where both asset classes decline together. Tang highlights that not all bonds behave alike: short‑duration Treasuries still show strong negative correlation with equities, while long‑duration bonds have become less negatively correlated, making bond selection crucial for risk mitigation.