Rather than ask how valid these concerns are, let's consider how we might protect ourselves if they are true, by looking at what happens when bonds and equities do both fall (this is worth doing, because your asset allocation should be based not just upon your view of what will happen, but upon the ranges of possible outcomes).
There have been eight occasions since 1986 when the All-Share and FTSE gilt indices both lost money over a six-month period - although only two since 2002. This tells us that falls in both are rare. But the rare chance of something nasty is something we should consider guarding against: that's why the insurance industry exists.
We can take precautions by noticing that two things have happened more often than not on these occasions.
One is that commodity prices, and especially oil prices, rose. One reason for this is that these are bad for both equities and gilts, as they point to both slower growth and higher inflation. This suggests we might protect ourselves from such an event by holding commodities such as an oil ETF - although not necessarily oil stocks themselves.
Gold, however, is not such great protection. There's a good reason why the metal soared in the 2000s as bond yields fell. It's because lower bond yields reduce the opportunity cost of holding gold: when yields are low, you're not giving up big returns on financial assets if you hold gold. This warns us that if bond yields rise, gold prices might fall.
Yes, gold offers some protection against inflation fears or geopolitical uncertainty, and it can be a useful diversifier. But it's not a guaranteed hedge against falling bond prices.
There's something else that has tended to happen when gilts and equities have fallen together. More often than not, sterling has fallen against the euro. This might be because a weak pound raises fears of higher interest rates, which are bad for gilts and equities. Or it might be that the same uncertainty that causes both to fall (or which is caused by both falling) leads investors to dump riskier assets such as sterling. Whatever the explanation, this suggests there's a case for holding euro cash as protection against falls in both equities and gilts.
I'm not sure, though, that this would be perfect protection. One thing that might trigger a sell-off in bonds and equities would be a global trade war that sees fears of worldwide protectionism. As the eurozone is a net exporter, this might see the euro fall (I say might as we don't have a relevant historic precedent here).
There is, though, another asset that protects us here - good old cash. Yes, it offers negative real returns. But your maximum annual loss on cash is probably around 2 or 3 per cent - the post-tax real interest rate. Your maximum possible loss on bonds and equities is greater. Yes, cash is expensive - but so is any good insurance.
The message here is perhaps a little cheerful. A fall in bonds and equities at the same time would be rare. But we can protect ourselves from it through a combination of cash, foreign currency and commodities.
