The bond market is the biggest and baddest market of them all.
All these crypto currencies can go to zero and no one who matters will care.
The entire pot industry can disappear tomorrow and it won’t matter.
Small-cap stocks aren’t relevant, from a systemic perspective.
Do you know what matters? The bond market.
And if there’s real stress out there in financial markets, you are going to see it show up in bonds.
It’s just math.
But a funny thing happened in Q2 this year. High Yield Credit spreads began to tighten.
If there was real stress, you would be seeing them widening.
In this chart below we’re looking at lower lows in the S&P500 but higher lows in the ratio between Junk Bonds and US Treasury Bonds: [Read more…]