Simply put -- the cynics are wrong. We should all know by now that if you own U.S. equities and international equities, small cap and large cap, and growth and value, that they are not negatively correlated -- there is systematic risk. In other words, if you buy a US mutual fund and an international mutual fund, you shouldn’t expect that if the US market goes south then the international market will only go north. That’s not the point of diversification amongst various equity asset classes/styles.
A popular saying with respect to investing is: “All ships rise with a rising tide.” This was not spawned by the markets of 2008 when it was difficult to find shelter within any equity investment. We need to get back to reality. The point is that diversification is a long-term investment strategy. There is systematic risk of equity investing (ships, rising, tide). William Bernstein wrote a nice piece on the subject for CNN Money in April.