The comovement between returns to stocks and nominal Treasury bonds varies over time in both magnitude and direction. Earlier research attempts to interpret this phenomenon as a consequence of variations in the link between inflation and future economic activity. I present some opposing empirical evidence, and instead argue that in the data, the comovement between stock and nominal bond returns is driven by real factors. I build a New Keynesian model that generates this behavior through the joint dynamics of output, inflation, and interest rates. The model features two types of persistent shocks to productivity growth: mean-reverting “cyclical” shocks and permanent “trend” shocks. The relative importance of these two shocks varies stochastically over time. The model quantitatively explains the observed patterns in stock-bond return comovement.