Soc Gen Warns Of Double Digit Correction As Bond Yields Creep Lower

Bonds interest rates have traditionally correlated negatively to stocks over longer periods of time. One logic is that both investments compete for investors based on a yield (returns) standpoint relative to risk. When interest rates move higher, stock investments need to be more attractive on a returns basis and, in the current case, vice versa. Looking at the world through this past performance lens in the historical oddity of negative interest rates, Societe Generale’s monthly Risk Premium report notes that stocks might not be as overvalued on this correlation basis. Considering forward looking events, however, might yield a different picture, which is in part why the bank is warning of the possibility for a double-digit stock market correction.