Disclaimer
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Given none of us can see the future, diversification is a key tool in our armoury when it comes to building an investment portfolio. It would be bold, if not reckless, to own a series of investments that all require the same conditions to succeed. Traditionally there are two major sources of diversification for the average equity investor: bonds and overseas equities. The issues with the stock/bond correlation are well covered (and we touched on ourselves in recent strategy articles here and here). Unfortunately for investors, there are serious problems with using overseas equities to diversify too. Below we discuss new research showing that the correlation between major stock markets has risen decade on decade and ask what the options are for investors in the future.
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