Stars in the Night Sky
The U.S. stock market’s recent zigs and zags have provoked much squawking and screeching. Wall Street pros, private money managers, and Millennial index fund enthusiasts all find themselves on the wrong side of the market’s swift movements. Even the best and brightest can’t escape President Trump’s tweet precipitated short squeezes.
The short-term significance of the DJIA’s 8 percent decline since early-October is uncertain. For all we know, stocks could run up through the end of the year. Stranger things have happened.
What is also uncertain is the nature of this purge: Is this another soft decline like that of mid-2015 to early-2016, when the DJIA fell 12 percent before quickly resuming its uptrend? Or is this the start of a brutal bear market – the kind that wipes out portfolios and blows up investment funds?
The stars in the night sky tell us this is the latter. For example, when peering out into the night sky even the most untrained eye can identify the three ominous stars that are lining up with mechanical precision.
These stars include a stock market top, followed by a monster corporate debt buildup, and a fading economy. In short, the stock market’s latest break is presaging a corporate credit crisis and global recession.
BofA/Merrill Lynch US high yield Master II Index yield – this looks like a quite convincing breakout, impossible to tweet down. In other words, the corporate debt build-up is beginning to bite back – and rather bigly, if we may say so (ed note, in case you’re wondering: the little poems are from a Spectator competition in which people used phrases from actual tweets to put together Donald haikus and poems). [PT]
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