"The signals across asset classes are diverging incredibly," warns Macro Risk Advisors' Dean Curnutt, "and we should all be afraid." All of that volatility is rolling back into corporate credit and that, inevitably will dramatically impact equity markets (explicitly through higher funding costs weighing on earnings or implicitly through lower buybacks and higher risk premia), "the illiquidity and implied defaults that we are seeing in credit markets are not at all priced into a 2060 S&P."
With commodities now glued at a 2-standard-deviation limit down trend (just as it was a limit-up trend into the last crash), volatility in this crucial asset class is literally exploding...
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and, if leveraged loans are any indication, crushing corporate credit markets...
[5]
Curnutt is right that equities are massively mispriced.
Charts: Bloomberg
