Russ Koesterich, BlackRock’s global allocation chief, argues that bonds have lost their hedging power against equity risk, with 30-year Treasury yields reaching 5.25%-5.32%, their highest since 2007, while the correlation between bonds and the S&P 500 has risen to approximately 0.45. He recommends energy stocks as a replacement for traditional safe-haven assets, citing their natural inflation hedge properties and inverse correlation to geopolitical risk. Energy stocks gained roughly 7.5% during a recent Middle East conflict that saw gold drop approximately 13% and the broader market decline about 4%. Koesterich, who has managed BlackRock’s Global Allocation strategy since 2017, also points to a broader rotation underway from technology into cyclical sectors.
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