There’s no shortage of handwringing over the dollar’s recent decoupling from Treasury yields.

As discussed at some length in the latest Weekly, the breakdown in that correlation is one of the more alarming market manifestations of the generalized angst engendered by the Trump administration.

Hopefully, that aberrant phenomenon proves fleeting. Because a falling currency in the presence of rising sovereign bond yields is the stuff of emerging markets. Or of Liz Truss. It reflects — or can reflect — not just fiscal worries, but concerns over institutional erosion.

From a kind of “we may have a bigger problem” perspective, the existential nature of that discussion relegated the 60/40 debate to the back burner during the immediate post-“Liberation Day” trade, but it’s never too far from investors’ minds.

If the USD-UST correlation is existential in general, the SPX-UST correlation is existential from a portfolio management perspective. Assumptions about that latter correlation underpin everything from the smallest retirement funds to the largest risk parity strats.

The 60/40 debate comes down to one question: Were we naive to assume the allegedly durable shift to a consistently negative stock-bond return correlation beginning in the second decade of The Great Moderation constituted the “new normal”?

There’s still no definitive answer. But recent events at the long-end of DM sovereign curves argue for shorter duration in balanced portfolios.

As Bloomberg’s Ye Xie, Liz Capo McCormick and Joel Leon wrote late last month, 60/40 had “come back into its own, performing as advertised [in 2025] even amid violent swings in both stocks and bonds.” But the vigilante revolt that pushed up yields on the longest-tenor debt issued by many DM economies now “threaten[s] that balance.”

The figure below, which uses calculations from JPMorgan’s cross-asset strategy team, gives you some context for the frequency (or, more to the point, infrequency) of simultaneous negative returns for US stocks and bonds looking back 25 years.

Until the inflation shock in 2022, negative one-month rolling returns in bonds and equities only happened about 10% of the time (a little less actually, if you take the average of the annual shares shown in the chart).

Since 2022, the occurrence of in-tandem negative returns is sharply higher, clocking in at 52% in 2022, 26% in 2023 and 20% so far in 2025.

As JPMorgan noted, stating the obvious, “For equities, moderate inflationary environments that are growth-positive can be supportive for returns, but inflationary shocks that are growth-negative amid aggressive central-bank hiking are” very challenging.

The bank doesn’t necessarily expect a return to the 2022 macro zeitgeist, but they did caution that fiscal concerns could create a less severe version of so-called “diversification desperation.”

“Another concern would be simultaneous negative bond and equity returns resulting from fiscal concerns driving a broad selling of US assets, with bonds no longer offering an effective hedge to equity weakness,” they wrote, adding that such a dynamic’s likely to be “limited and more tilted to the long-end of the curve.”

From an asset allocation perspective, the call’s pretty easy: If you’re determined to stay in USTs for your equity hedges, shift your longs to the short and intermediate sector of the curve. (Not investment advice.)

The issue for the US government — i.e., for Scott Bessent — is that if that simple strategic bias becomes consensus, it’ll mean less demand for the already unloved long bond, biasing yields higher still.

Now who’s ready for Thursday’s $22 billion long bond sale?