The Diversification Mirage

TL;DR

Traditional diversification strategies are being challenged by current market dynamics.
The concept of a 'diversification mirage' arises from increased market volatility and geopolitical fragmentation.
Past correlations between stocks and bonds are less consistent due to persistent inflation and higher interest rates.
Investment decisions of large global companies, such as in AI, can now have systemic effects.
Global indices often show high exposure to US stocks and a few large tech companies.
Diversification needs to be viewed dynamically, focusing on real return drivers.
Attention to credit quality and business model solidity is crucial due to rising corporate leverage.
A deeper analysis of underlying exposures is necessary, moving beyond conventional indices.

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