We just published our November Monthly Investment Compass this morning — it’s one of our most popular reports.
Monthly Investment Compass is a comprehensive collection of key charts, data, and intermarket analysis that convey our best investment ideas for the US stock market, US market sectors, and US interest rates over the next 1-2 quarters. It includes an accompanying video in which John Kosar, Director of Research, discusses each chart’s implications for upcoming US financial market direction.
The slide below, one of 28 from today’s report, shows that high yield corporate bond spreads are starting to widen again — which means that the forward-looking bond market is pricing in tightening credit conditions.
The red highlights in the chart at left show that the stock market does not like tightening credit conditions as the past two periods of monthly widening in the spread: 1) put a lid on the early 2015 rally in the S&P 500 (SPX) and helped trigger the August collapse, and 2) coincided with the the market’s mid September to mid October secondary decline.
The chart at right shows that the total net assets invested in the SPDR Barclays High Yield Bond ETF (JNK) began a trend of monthly contraction on November 10th, which will drive prices lower and yields higher, the latter which will help to widen even further the spread in the left half of the slide.
History shows that as long as corporate bonds spreads continue to widen, stock market rallies like the one that took place this week are unsustainable.
The metrics in this slide are just 2 of close to 50 different markets metrics that we track every day to keep our clients up to date on what is happening “under the hood” of the US stock market — which keeps them one step ahead of the next market move, and ready and prepared when the next correction occurs.
Asbury Research subscribers can view the entire report and accompanying video by logging into the Research Center.