As far as credit markets are concerned, U.S. stock investors have lost touch with reality. As Bloomberg [4]reports, the collapse in high-yield bonds "is something that sooner or later is going to impact the stock market," according to one major asset manager.
[5]
We have, of course, seen this picture before (most egregiously in 2007/8) and as Bloomberg [4]calculates over 70% of the time since 1996, as spreads widened as much as they have since April, the S&P 500 has fallen, with the average decline exceeding 10%.
[6]
History may not repeat but it sure does rhyme...
Charts: Bloomberg
