Presented with little comment but given the seemingly unlimited balance sheet of the JPMorgan CIO office and the ability to sell as much protection (implicitly bullish) and gather premium as credit derivative index notionals soared at an incredible rate, are we stretching the point a little too far to claim that perhaps, just perhaps, one of the new transmission mechanisms for the global central banks' liquidity flows is leveraged credit - which implicitly enables stocks to be supported by lower funding costs and exhibit the kind of portfolio rebalancing effect that was desired. Perhaps even more critical is the fact that IG9 (the credit index in question) contains some of the most worrisome of the major corporate credits and thus the highest short-interest in stock-land - which implicitly exaggerates any non-MtM-based entity's ability to create a short-squeeze? Is the entire market now a function of one prop trader (hence forbidden by the Volcker Rule) being forced to (un)wind his trade now that he is finally in the public spotlight as we wonder - are recent market jitters merely the byproduct of Iksil selling some of his excess exposure, and being the marginal price setter across virtually every asset class?
This is the net notional risk exposure in IG9 (which has surged around $50bn this year) relative to the S&P 500...
This is not a correlation of one asset class with another but the 'flow' into one asset class (leveraged credit) relative to the stock of another (equities).
(h/t Mary Childs & Shannon Harrington for DTCC data index)