The co-movement of Treasury bonds and stocks is an important indicator for both policy makers and for long-term investors. A positive co-movement between nominal Treasury bonds and stocks, as in the 1980s, means that nominal bonds amplify the volatility of stock investors’ portfolios. This pattern tends to arise when investors anticipate inflation that is accompanied by a recession, which often results from an adverse supply shock – driving up prices – and a quick and energetic interest rate hike – tipping the economy...