(July 17): Like many things in life, “defensive” assets do not always behave as promised. But these are particularly unusual times. The Covid-19 crisis has triggered the fastest bear market in history, followed by the fastest initial rebound. Traditional defensive assets provided some protection during the March sell-off, but to a lesser degree than in past crashes. This raises the question as to what constitutes a genuinely defensive asset in the era of coronavirus and beyond.

To answer this, we briefly examine asset class performance during the recent market collapse and correlations between security types. We then consider likely market scenarios, what makes an asset truly “defensive” asset, and how investors can diversify portfolios to better withstand future market evolution.

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