Description:
This weekly chart shows the long term correlation between the VIX (in orange) to the corporate bond yield spreads.
The light blue line shows the BAML investment grade bond index yields a spread of 3.9% above the 10 year treasury.
The white line shows the yield spread between investment grade BBB bonds and BB speculative grade.
Widening credit spreads indicate growing concern about the ability of corporate borrowers to service their debt.
Commentary:
Are the market bulls feeling some smug satisfaction at this point?
Traders and analysts often describe this current market as complacent.
VIX is back below the teens, and SPX is currently pushing back into all time highs.
Just a few months ago the index was valued 20% lower. What an epic rally in just a few months time!
The recent volatility over the past months also demonstrates the uncertainty underlying the market valuation.
No new meaningful highs on the SPX have been made in almost 220 days.
The index is only a meager 2% above the highs from 450 days ago.
Investors need to carefully weigh the risk to reward before putting fresh capital to work at the current level.
This weekly chart shows the long term correlation between the VIX (in orange) to the corporate bond yield spreads.
The light blue line shows the BAML investment grade bond index yields a spread of 3.9% above the 10 year treasury.
The white line shows the yield spread between investment grade BBB bonds and BB speculative grade.
Widening credit spreads indicate growing concern about the ability of corporate borrowers to service their debt.
Commentary:
Are the market bulls feeling some smug satisfaction at this point?
Traders and analysts often describe this current market as complacent.
VIX is back below the teens, and SPX is currently pushing back into all time highs.
Just a few months ago the index was valued 20% lower. What an epic rally in just a few months time!
The recent volatility over the past months also demonstrates the uncertainty underlying the market valuation.
No new meaningful highs on the SPX have been made in almost 220 days.
The index is only a meager 2% above the highs from 450 days ago.
Investors need to carefully weigh the risk to reward before putting fresh capital to work at the current level.