BNY’s Bob Savage says global equities are posting another weekly gain, led by technology, even as Oil and the Dollar rise and risk-off momentum in iFlow accelerates. Equity outflows have intensified overall, but flows into core government bonds remain resilient. The report stresses that changing correlations are challenging risk parity strategies as stocks and bonds increasingly move together.

Risk parity strained by shifting correlations

"The U.S. stock market is set for another weekly gain, making the run-up in risk the best since 2023. However, correlations for risk are mixed. On the day, oil is higher, as is USD."

"Both of these usually mean lower global equities, but shares are buoyant, led by technology, while bonds are bid. The news headlines also provide mixed signals on the prospect of a quick resolution to the U.S./Iran conflict, while the economic focus does not fit the narrative either: Japan’s April core CPI was the lowest in four years, while German sentiment rose in the May ifo survey."

"Risk-off momentum has accelerated, with iFlow Mood falling to its weakest level since the “Liberation Day” volatility episode in April 2025. Equity outflows have intensified, while flows into core government bonds have remained resilient."

"The need for a change of narrative shows up most clearly in the current risk parity programs, which are driving stocks and bonds to rally or fall together. The unofficial start of summer this Memorial Day weekend in the U.S. will be a time to rethink the war and 2026 investment mixes."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)