The Analyst’s Course · Macro Regimes
Rates and Equity Duration — the 2022 Lesson
Equity as a duration instrument
A stock's dividends and buybacks arrive across decades — a long "coupon stream" with no maturity. Duration measures how sensitive a price is to rate changes: long-duration assets fall more when rates rise. Growth stocks are equity's long-duration end (value concentrated in the far future); value and utilities sit at the short end. In 2022 the 10Y rose ~2.7pp; long-duration cohorts fell 50–80% while short-duration value was flat-to-up. Same market, same rates — duration sorted the damage.
The 60/40 problem
The classic 60/40 portfolio assumed stocks and bonds hedge each other. That assumption holds when rates move because of growth shocks (bad growth → yields down → bonds up → stocks down → bonds hedge). It inverts under inflation shocks (2022): inflation drives yields up, so bonds fell −13% while stocks fell −19% — both legs down together, the worst 60/40 year in modern history. The regime panel's two signals (valuation, curve) are partly popular because they flag exactly these regime boundaries where old correlations die.
Real yields: the cleaner lens
Equity cash flows are (roughly) claims on real activity, so the real yield (TIPS 10Y) is the cleaner discount-rate lens. 2022 again: real 10Y went from −1.1% to +1.7% — a 2.8pp swing in the true denominator. When real yields spike, the entire discount-rate-sensitive complex reprices regardless of nominal Fed funds. The macro panel's Treasury data includes the long end where this lives; the habit to build is checking the real long rate before blaming "the Fed" for equity volatility.
ΔP ≈ −D × Δy
Duration damage estimate — A duration-15 asset × +1pp yield ≈ −15%. Equity "duration" is implicit but the arithmetic rhymes.
2022: the annus horribilis in numbers
S&P 500 −19.4%, US 10Y Treasuries −13% (worst bond year on record), 60/40 −16.5% (worst since 1937). Both legs down together for the first sustained period since the 1970s — because inflation, not growth, was the shock. Every diversification pitch written between 2009 and 2021 assumed the hedge; the regime that killed the assumption was flagged by the curve (inverting from July) and the denominator math (lesson 2 of the valuation track) well before the year ended.
What you'll practise
When rates rise 1pp, which equity cohort falls most?
3 graded checkpoints · certification exam at the end of the track
Sources
Shiller, Irrational Exuberance (3rd ed.); Estrella & Mishkin (1996); multpl.com; US Treasury
Learn content is for education only — not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk. Examples are simplified and historical patterns never guarantee future results.