In the recent rally off the June low where $SPY eclipsed its June high, the high yield credit spread never broke below its June low, and held its trend of higher lows and is once again moving higher pic.twitter.com/t3rHRSPZH0
— Stacey.A.Lee (@BBaxter2020) August 30, 2022
Today’s Chart of the Day was shared by Stacey Lee (@BBaxter2020). The chart shows the S&P 500 ($SPY) and credit spreads ($IEI/$HYG) over the past year. Credit spreads have been trending higher for the majority of 2022, indicating stress in the credit markets. Stocks and other risk assets don’t like it when credit spreads widen out like this…they move inversely. Stacey points out that while the S&P 500 made a new high in August, credit spreads never made a new low. Stocks will likely continue to struggle as long as the uptrend in credit spreads remains intact.