Track 05Module 6 of 68 sources
Cross-asset: how stocks, bonds, oil, gold and currencies move together
Use relationships between markets to confirm or question a view, and notice when a relationship changes.
Key ideas
- Markets are linked through a few channels: growth, inflation, real rates, the dollar and risk appetite. A move in one asset should show up in its neighbours.
- Correlations are not constants. Stocks and bonds move together when inflation is the worry and apart when growth is the worry.
- Correlations rise in a crisis mostly because volatility rises. That is interdependence, and it means diversification shrinks when you need it.
- When the news says one thing and prices say another, trust prices and ask what the news is missing.
Start hereWatch or read these first. They carry the core idea.
Book
Intermarket Analysis: Profiting from Global Market Relationships
John J. Murphy
The standard text on how bonds, stocks, commodities and currencies lead and lag one another.
Report
CoreThe standard references. Work through them once the idea is clear.
Paper
No Contagion, Only Interdependence: Measuring Stock Market Comovements
Forbes, Rigobon · 2002 · The Journal of Finance · doi:10.1111/0022-1082.00494
Shows that apparent contagion is mostly higher volatility. Changes how you read crisis correlations.
Paper
Time series momentum
Moskowitz, Ooi, Pedersen · 2012 · Journal of Financial Economics · doi:10.1016/j.jfineco.2011.11.003
Trends persist in every major futures market for about a year.
Tool
Tool
Tool
Go deeperResearch, primary sources and data for when you want the detail.
Paper
Value and Momentum Everywhere
Asness, Moskowitz, Pedersen · 2013 · The Journal of Finance · doi:10.1111/jofi.12021
Value and momentum across asset classes share common drivers.
Practice
Each morning for a month, read the Connections page before the news. Write one sentence on what prices imply. Then read the headlines and note where they disagree.
See it live
Where this leads
05.3 · Macro and LiquidityThe dollar, carry and the global financial cycleExplain why a strong dollar tightens conditions everywhere, and how carry trades build and unwind.06.1 · Geopolitics and MarketsMeasuring geopolitical risk and how it pricesUse risk indices and market prices together to decide whether an event matters for a portfolio.