Five Charts Worth Watching In Q4


Head of SPDR Americas Research

  • Stocks and bond correlations are their highest since 2006
  • Realized volatility is on par with the Great Financial Crisis (GFC)
  • Total combined ETF, mutual fund, and money market flows are negative  

With 72% of global stocks and 99% of bonds now trading at a loss,1 just five of the 44 markets I track daily have positive returns: Energy, Utilities, oil, commodities, and the US dollar. Amid such dour returns, five trends have emerged that I think are worth watching as we head into the fourth quarter.

Stocks and Bonds Are Moving Together

Over the past 20 years, the historical return correlation between stocks and bonds has been, on average, negative 29%.2

But 2022’s calendar year 60-day average (and median) correlation between the S&P 500 Index and the Bloomberg US Aggregate Bond Index is positive for the first time since 2006. Now, in 2006 both stocks and bonds had gains, so the positive correlation wasn’t painful.

But the rolling 60-day correlation between stocks and bonds has been positive for 70 consecutive periods through mid-September. And with rates likely to continue to edge higher due to ongoing hawkish policy from the Federal Reserve (Fed), this positive correlation is likely to persist.

Stocks and Bonds Show Positive Correlation for 70 Consecutive Periods

Stocks and Bonds Show Positive Correlation for 70 Consecutive Periods

Beyond the VIX, Realized Volatility Pushes Higher

Implied volatility, measured by the CBOE VIX Index, has remained above long-term averages — averaging 25 this year versus the long-term average of 19.97.3 But that number isn’t extreme. In 2020 for example, the calendar year average approached 30.

Using just the VIX to measure volatility in this environment has its limitations. Analyzing realized volatility by looking at outsized day-over-day changes can better illustrate the current market’s risk regime.

The S&P 500 Index has witnessed returns of more than +/-1% on 49% of the days in 2022, as shown below. This far exceeds the historical calendar year average of 24%. It’s also the third highest figure since 1970 — just narrowly behind the dot-com era (50%) and the Great Financial Crisis (53%).

More frequent outsized moves reflect the market’s internalization of uneven economic data points, shifting hawkish monetary policies, heightened geopolitical tensions, and waning earnings sentiment.

Because these factors likely will persist in the fourth quarter, expect choppy day-over-day returns to continue.  

S&P 500 Moved Up or Down by More than 1% on 49% of Days in 2022

S&P 500 Moved Up or Down by More than 1% on 49% of Days in 2022

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1 Bloomberg Finance, L.P., based on the MSCI ACWI IMI Index and the Bloomberg US Aggregate Bond Index as of September 14, 2022.
2 Bloomberg Finance, L.P., based on the daily returns of the S&P 500 Index and the Bloomberg US Aggregate Bond Index as of September 14, 2022. Correlations from 2002-2022.
Bloomberg Finance, L.P., based on the CBOE VIX Index.
Bloomberg Finance, L.P. as of September 14, 2022 based on SPDR Americas Research calculations based on the monthly returns of the sectors within the S&P 500 Index using a 12-month, 6-month, and 3-month momentum screen.
5 Bloomberg Finance, L.P., based on the return of the S&P 500 Index and the MSCI EAFE Index.
Bloomberg Finance, L.P., based on the return of the S&P 500 Index and the MSCI EM Index.
7 The Fed – Money Stock Measures – H.6 Release – August 23, 2022 (
8 Bloomberg Finance, L.P., based on SPDR Americas Research calculations.


Bloomberg US Aggregate Bond Index
The Bloomberg US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

The VIX Index is a financial benchmark designed to be an up-to-the-minute market estimate of the expected volatility of the S&P 500® Index, and is calculated by using the midpoint of real-time S&P 500 Index (SPX) option bid/ask quotes.

The MSCI ACWI Investable Market Index (IMI) captures large, mid and small cap representation across 23 Developed Markets (DM) and 23 Emerging Markets (EM) countries

The MSCI EAFE Index is a free-float weighted equity index. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.

The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

S&P 500 Index
The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

Originally Posted September 20, 2022 – Five Charts Worth Watching in Q4


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