More and more “risk on” sectors are signaling that the stock market is topping.
High Yield Credit lead stocks to the upside during this rally. It’s now stalled and is rolling over.
S&P 500 Vs. HYG
The same is true for leveraged loans (loans made to companies at risk of default). This sector peaked in late February and has already begun to correct.
S&P 500 Vs. PowerShares Senior Loan Portfolio (NYSE:BKLN)
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It’s the same story for housing.
S&P 500 Vs. XHB
Lumber.
S&P 500 Vs. Lumber
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Stocks are pricing in economic perfection: an environment in which growth is high and inflation controlled. Every other risk asset is pricing in a weak economy that will soon trigger a significance “risk off” event AKA possible crash.