Stocks, Bonds and Gold ETF Down

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This past Friday (3/6/2015) was a difficult day for most portfolios that are long any major asset excluding the dollar index and volatility. Stocks, bonds and gold ETF declined.

SPY was down 1.4%, TLT fell 2.2%, GLD (Gold ETF) also down 2.7%.

We got some reactions from some of our subscribers asking if the models are failing, especially regarding the Gold ETF. So let’s put things in perspective.

Is this common?

Gold ETF down

As you can see this is an outlier. It has only happened a few times in over 12 years that all, including Gold ETF fell. 

Well, let’s ask another question. Is it often that both SPY and TLT fall the same day?

Gold ETF performance analysis

On the other hand, the SPY and TLT declining on the same day is not uncommon.

Let’s say we panic, we think everything is going down and short on the next open. We cover the next day close.  Over time, we lose money…not a good idea.

401k IRA retirement

Top pane: Price of 20 year Treasury ETF: TLT. Lower pane: Bakctest results starting with 100k.

Now let’s do the opposite. We go against our instinct and actually buy both SPY and TLT at the next day open. We sell the next day at the close. We see that over time this is a better strategy.   

DIY investments investor gold etf

Top pane: Price of 20 year Treasury ETF: TLT. Lower pane: Bakctest results starting with 100k.

So what does this mean? 

Co-movement between equities and bonds are not uncommon. It does not mean that the basic correlation between the two assets has fundamentally changed. History shows that thinking something is wrong and selling is counter-productive. 

The idea is to have a long term plan and to follow it while paying less attention to short term movements, news, hype and emotions. It is possible that a model stops working. In this case, that would mean the fundamentals of the stock & bond market have radically changed.  Coming to that conclusion needs to be evaluated on a different basis over a longer period of time, and there is no indication of that yet.


2017-10-02T20:00:00+00:00By |5 Comments

About the Author:

Vangelis has a B.A. in Economics from Cornell University and an M.F.A. in Film producing/financing from the University of Southern California. After the 2008 crisis he devoted his time to researching, trading and blogging about quantitative strategies. He has built, run and tested literally thousands of trading systems using Matlab, Python, C#, QuantShare and Amibroker. His "Sanz Prophet" quantitative blog has been part of the "Whole Street" quant blog aggregator since inception. Vangelis is series 65 certified.


  1. Roger 03/11/2015 at 10:30 am

    Thank you for putting things into perspective, it calms the nerves some what. The question remains, for nearly 3 decades we have been with falling interest with the l.t. treasuries. When we reverse this, how are the treasuries going to correlate to the s&p500? Will our strategy work as well? Can we look back that far with the Mkt. data to see ?
    Thanks again
    R. Svensson

    • Vangelis 03/12/2015 at 3:24 am

      Thanks you for the comment and an excellent question. Yes, the main issue is price data history although one can extrapolate historical correlations by inverting Treasury yield data. We will keep you posted.

  2. Nelson 03/19/2015 at 12:05 pm

    I will also be interested in whatever you want to say about this. My concern though is not the main strategy. I am curious if there is something other than cash you would roll into if interest rates look to be climbing for a while and TLT falls and stocks fall and volatility rises…

  3. Scott Walker 03/19/2015 at 7:30 pm


    Answering that implies that one can & will forecast the interest rate moves before and better than the market does. Generally, over the last 6 years virtually all interest rates forecasts have been both unstable and wrong – the worst of all worlds. If and when it becomes more clear what interest rates moves are highly likely to take place, then the price adjustment will likely to have already happened – perhaps even over-adjusted.

    Remember – all asset classes will react – and to some extent may have some negative impact everywhere. But – only to the extent that the market is shifting its terminal value estimate of the end point of the future interest rate adjustment cycle. Further, it is my personal forecast that the Fed can only move the short end of the curve and they have lost all ability to the international bond/currency markets to influence the long end. Hence, their moves will only serve to flatten the yield curve.

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