Many commentators have noticed the positive correlation between bonds and equities over the past few years and have announced the end of bonds usefulness as a diversifying asset. Often this is cloaked in the guise of “The 60/40 portfolio is dead, long live alternatives!”.

There is quite a lot going on here, much of it mischievous. This narrative vastly exaggerates the meaning of negative correlation and is guilty of premature extrapolation. Worse still, the argument is often made by floggers of alternative assets, who disingenuously use volatility as a c...