Line chart tracks the correlation of macro strategies with the S&P 1500 Index and the correlation of the bond index with the S&P 1500 Index.
Y-axis: Rolling 24-month correlation.
x-axis: January 1997 to September 2022
While the Bloomberg U.S. Aggregate Bond Index generally demonstrates a lower correlation to the S&P 1500 Index than does the HFRI Macro Index, there are two examples in this time period when that is not the case.
- October 2008 to October 2010, the macro index fluctuated between about -0.05 and 0.19 at a time when the bond index was between 0.37 and 0.25.
- February 2022 to September 2022, the macro index fluctuated between 0.1 and 0.40 at a time when the bond index was between 0.48 and 0.72.
Positive numbers represent a positive correlation, negative numbers represent a negative correlation, and zero represents no correlation.
Sources: © 2022 – Morningstar Direct, All Rights Reserved1 and Wells Fargo Investment Institute. Monthly data from January 1, 1997 to September 30, 2022. Index returns do not represent investment performance or the results of actual trading. Index returns reflect general market results, assume the reinvestment of dividends and other distributions and do not reflect deduction for fees, expenses, or taxes applicable to an actual investment. Unlike most asset class Indexes, HFR Index returns are net of all fees. Because the HFR Indexes are calculated based on information that is voluntarily provided actual returns may be lower than those reported. An index is unmanaged and not available for direct investment Past performance is no guarantee of future results. The HFRI Macro Index: Investment Managers which trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed-income, hard currency and commodity markets. Managers employ a variety of techniques, both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches and long and short term holding periods. Although some strategies employ RV techniques, Macro strategies are distinct from RV strategies in that the primary investment thesis is predicated on predicted or future movements in the underlying instruments, rather than realization of a valuation discrepancy between securities. In a similar way, while both Macro and equity hedge managers may hold equity securities, the overriding investment thesis is predicated on the impact movements in underlying macroeconomic variables may have on security prices, as opposes to EH, in which the fundamental characteristics on the company are the most significant are integral to investment thesis. The S&P 1500 Index is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600. The Bloomberg U.S. Aggregate Bond Index is composed of the Bloomberg U.S. Government/Credit Index and the Bloomberg U.S. Mortgage-Backed Securities Index and includes Treasury issues, agency issues, corporate bond issues, and mortgage-backed securities.
Alternative investments, such as hedge funds, are not appropriate for all investors and are only open to accredited or qualified investors within the meaning of the U.S. securities laws. They are speculative and involve a high degree of risk that is appropriate only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions. Foreign investing has additional risks including currency, transaction, volatility and political and regulatory uncertainty.
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- Trends in commodities, currencies, and interest rates have led to strong returns for Macro strategies, providing valuable diversification benefits due to a lower correlation to equities.