After strong results from a variety of sector bellwethers, Corporate America is on track for its best quarterly earnings season since 2011. Yet over the past five trading sessions, the S&P 500 has dropped about one percent. Thursday offered some respite as the gauge ended the session in the green. But the choppy trading is a frightening prospect for bulls, who have relied on the 80 percent of index gains that traditionally come during reporting seasons.

“Limited price upside to strong earnings and revenue could be function of investor concerns on profitability moving forward,” said UBS AG strategists including Keith Parker in a note.

Beneath the surface, however, investors are rewarding positive earnings -- quantitative stock baskets that hinge on earnings metrics have performed the best over the past week, data from Bank of America Merrill Lynch show.

While that suggests a sustained rebound could be in the offing, it’s also possible -- with the asset class already priced so richly -- that steady earnings won’t be enough to lift the broader market in earnings seasons to come.

Is The Traditional Stock-Bond Portfolio Doomed?

Easy diversification may be a thing of the past. Tumbling Treasuries in tandem with sliding stocks underscore bonds’ diminished value as a portfolio hedge. Correlations between and within asset classes are in a state of flux -- in equities, traditionally defensive stocks are moving akin to the broader market in recent sessions.

As such, simple allocation strategies are struggling. The DFA Global Allocation 60/40 portfolio is trading in the red this year while realized price swings are elevated, further eroding returns adjusted for risk.

Global bond yields would need to decline by more than 1 percentage point to offset losses in a given 60/40 portfolio, which is unlikely to happen, said analysts at Morgan Stanley.

“Given where global bond yields stand currently, the ability of bonds to offset an equity market sell-off is diminishing now,” wrote the bank’s strategists including Wanting Low in a note.

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