Since the start of Q2 2021 bond prices and stock prices have, quite unusually, risen alongside each other as they each reinforced the narrative of a reflation trade that will lift all equity boats and sink all bond boats.

But, since the start of the week stocks and bond yields have re-engaged in their more ‘normal’ (yields down, stocks down) relationship.

Suddenly breaking the prevailing 2021 relationship regime and creating a negative 2-month rolling correlation between bond prices and equity prices (positive correlation between bond yields and equity prices).

As Goldman notes, should that correlation persist (and the lower interest rates go, the more likely it is to, in our view), bonds may regain attractiveness as a diversifying asset, potentially reducing some demand for equity protection (even though for now thebid for downside tail risk, as we detailed earlier, is at panic highs).

But, perhaps what they are all really worrying about its the potential for a hawkish surprise at the late-August Jackson Hole conference.

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