Municipal Bond Forum

Home > Municipal Bond Forum > Correlation between stocks and bonds?

Correlation between stocks and bonds?


I read your articles and find them very interesting, but here’s a question I don’t see addressed: Why do high-yield tax-exempt municipal bond funds act more like stock (equity) funds than bond funds? I thought bonds were supposed to move in a somewhat opposite fashion relative to stocks over time. My correlations don’t show this negative relationship.



James A. Klotz responds:

From the outset, we are not proponents of bond funds. We believe that if an investor has the wherewithal to invest in individual bonds and construct one’s own personal bond portfolio, it is in his best interest, as it can be done selectively without large sales charges and ongoing fees.

Historically, there is no negative correlation between stocks and bonds.

The enemy of bonds is inflation and will cause rates to rise, but inflation is not kind to stocks either.

Mutual fund prices are mostly influenced by investment dollar inflows and fund share redemptions.

Mar 20, 2018

Start here.

Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.

     The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk