(Bloomberg) -- Stocks and bonds have been traveling almost in lockstep in recent months, heaping pressure on investors seeking to hedge risk by splitting their portfolios between the two asset classes.

The 60-day correlation between the Bloomberg Global Aggregate Bond Index and the MSCI All Country World Index of stocks climbed to the highest level since 2012 this week, according to data compiled by Bloomberg starting in 1999. On a 120-day basis, the link is at a record high.

The ever-tighter relationship can largely be put down to rising interest rates. The avalanche of tightening from central banks around the world as they aim to counter inflation has wiped out 18% of the value of stocks and 17% from bonds since the start of 2022. A typical 60-40 portfolio is on course for its worst year since the global financial crisis.

Some relief may be on the horizon for investors hoping that hedging will become possible again.

Pacific Investment Management Co. founder Bill Gross and DoubleLine Capital’s Jeff Gundlach are both beginning to position for a bond rally on the expectation that stuttering economic growth will convince central banks to starting cutting interest rates. Equities would still be likely to extend declines in such a scenario as a deteriorating global economy weighs on corporate earnings.

“When you go through a period of inflation stability, investors worry instead about economic growth. In that circumstance bonds and equities perform differently,” said Shane Oliver, head of investment strategy and economics at AMP Services Ltd. “If we do go into a global recession next year, you would have a situation where bonds rally and equities sell off.”

(Updates with comments from AMP’s Shane Oliver)

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