Fed meeting expected to leave U.S. bond-stock relationship out of whack

The Federal Reserve's whatever-it-takes approach to stave off economic calamity has kept interest rates near zero and helped drive U.S. stocks back to pre-pandemic record levels, while weakening the usual dynamic between safe-haven U.S. Treasuries and riskier equities. Stocks and bonds' moving in parallel is one of the distortions Fed policy makers may ponder when they meet next week, although they are expected to let the emergency measures already implemented in the wake of the coronavirus outbreak work through the financial system. The recent rise in Treasury prices, which typically climb when investors seek safe harbors during uncertain times, appears at odds with the exuberance seen on Wall Street, where the S&P 500 last week came within 3.5% of its February all-time high, set before it was clear the spread of COVID-19 would wreak havoc around the world.

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