An Eerie Parallel
One of this week's most popular posts was "Want An Early Warning When The Cycle Turns? Ask Credit, Not Stocks."
It consisted of one sentence and two charts:
For those of you interested in getting a heads up before the proverbial sh*t hits the fan, look to credit spreads, because if the last two crashes are any indication, stocks will sleep walk right off the cliff.
Note that a persistent theme here has been the extent to which there's no room left for credit markets to tighten further. Every
The previous two cycles did not have massive global QE which are now causing a global credit circle jerk that distorts IG credit spreads. Without that pricing signal one does not know what will come next or when. IMO there will be no leading widening unless the ECB and BOE stop buying corporate credit. The amount of credit spread tightening we have seen the past 12 months would normally signal the end of a recession and beginning of a strong recovery cycle…all without the proper cleansing of a default cycle. Strange days indeed.