US Yield Spike Disrupts Stock-Bond Correlation, Challenges 60/40 Portfolio and Spurs Crypto Interest

A surge in US Treasury yields above 5% has disrupted the traditional inverse correlation between stocks and bonds, undermining the widely used 60/40 portfolio strategy. Whereas bonds once cushioned investors from stock market downturns, both asset classes have now been declining together, erasing the model’s prior outperformance over the S&P 500. The yield spike, fueled by concerns over US fiscal deficits and spiraling debt, has also transformed bonds from a defensive safe haven to a risk asset. Alongside this, Moody’s downgrade of US debt, tariff threats from President Trump—including a delayed 50% levy on EU goods—and rising volatility (as seen in the VIX) have all contributed to market instability. Industry experts now recommend shifting towards short-term Treasuries for a safer hedge. Persistent macro risks include policy uncertainty, high equity valuations, and the threat of renewed trade wars. These changes increase market unpredictability and may drive investors toward alternative assets such as cryptocurrencies. For crypto traders, this means heightened caution, ongoing choppiness across markets, and potential capital flows into the crypto sector as traditional allocations are re-evaluated.