Stocks & Bonds...

[kanjoh321]

Just a few question here, why are stocks and bonds inversely correlated?


Regards

[kanjoh]

Stocks and bonds move in opposite directions because bonds produce consistent returns, while stocks tend to appreciate with the strength of the economy. If the economy is improving though, inflation kicks in and therefore, the real return of bonds goes down, which lowers their resale value.

[TheColonel]

Bonds are considered a "safe" investments, while stocks are considered a "riskier" investment during difficult economic times. As more people put more money into bonds, driving prices up, rates or returns go down. This is why mortgage rates, etc. are currently so low.

For prosperous times, stocks are a generally a better investment (depending on several factors).