Great Deleveraging and Market Panic: Are We There Yet?
Clearly, stock market feels different now than it did at any point over the last few years. In this note we will look at two important indicators to understand if we are facing a market rout or merely a correction. The two crucial indicators we will consider are junk spreads and Fed Funds Rate. As a reminder junk spread is essentially the difference in yield on a lowly rated financial instrument, say CCC, and a Treasury bond of similar maturity. Therefore, junk credit spreads provide a great idea of how investors take risk in an economy. That is because investing in companies just one step above bankrupt is the nature...Read More
