Loading ...A Well-Established Tradition
We pointed out at the time that in light of “QE” by major central banks “it is quite possible that future developments will continue to diverge in a number of respects from historical experience. In short, we may not get the warnings we usually get before euphoria turns to panic.” waiting for high yield bonds to conveniently crack and provide advance warning of a future stock market decline may not be the best idea
Seemingly out of the blue, equities suffered a few bad hair days recently. As regular readers know, we have long argued that one should expect corrections in the form of mini-crashes to strike with very little advance warning, due to issues related to market structure and the unique post “QE” environment. Credit spreads are traditionally a fairly reliable early warning indicator for stocks and the economy (and incidentally for gold as well). Here is a chart of US high yield spreads – currently they indicate that nothing is amiss: