Correlation of stocks and bonds for diversification? Higher Prices Drive Sales Growth for Restaurants, Food Makers

• Given the Federal Reserve’s monetary-easing policies of recent years, it would be a mistake to assume that lower interest rates and a rising bond market automatically mean nearing economic trouble
• Stock-market investors have — in fact, grown to prefer lower rates more than they worry about economic weakness. Investors will likely keep buying stocks if the weakness is not too severe—which means equities may very well continue moving in unison with bonds
• If all six-month periods since 1926 in which both the S&P 500 (including dividends) and long-term U.S. Treasury’s gains are at least as much as the first half of this year, are considered, the stock and bond markets didn’t tumble in the wake of those periods —in fact, they continued to rise on average

• U.S. companies are wagering that customers are willing to pay more as the record-long economic expansion continues. Some are notching revenue at the expense of customer counts or unit volumes
• Consumers are driving the decadelong U.S. economic expansion, as other sectors including manufacturing and the farm economy are hurt by trade tensions and tariffs
• Restaurants and food makers are seizing the opportunity to charge more, in part to cover higher costs for ingredients, transport and labour that many companies say they are facing
• Restaurant prices have climbed faster than generally modest inflation rates in recent months