U.S. Stocks Relative to Bonds Over the past nine months, U.S. stocks have shown remarkable resilience compared to bonds, reflecting a persistent “risk-on” sentiment in markets despite increased volatility and macroeconomic challenges. Image: Bloomberg
Bond Volatility – MOVE Index The MOVE index, indicating the implied volatility of U.S. Treasury options, has recently reached its highest level since 2023, reflecting heightened uncertainty and broader financial instability. Image: The Daily Shot
U.S. High Yield Corporate Bond Spreads While tight high-yield credit spreads generally reflect robust market confidence, they can also serve as a warning of excessive investor complacency. Given this dual nature, it’s crucial to monitor credit spreads closely. Image: Topdown Charts
S&P 500 vs. High-Grade U.S. Bonds vs. Junk U.S. Bonds While U.S. stocks generally have higher long-term returns, the current economic climate may favor junk U.S. bonds as a more stable investment option amidst fears of an equity downturn. Image: Bloomberg
Debt-to-GDP and 10-Year Government Bond Yield While it might seem intuitive that higher debt burdens would lead to higher yields due to increased risk, this relationship has not held true in practice. Yields are influenced by multiple economic factors, not just debt levels. Image: BCA Research
AAII – U.S. Retail Investors Allocation to Stocks, Bonds and Cash High equity allocations and low cash positions don’t always mean a market reversal is near. However, they suggest that much of the market’s potential gains may already be priced in, as investors have heavily committed to equities. Image: Real Investment Advice
U.S. Households’ Allocation to Equity, Bond and Cash Current high levels of U.S. household equity allocation may signal potential risks for future investors, as historical trends suggest this often precedes lower market returns. Image: Goldman Sachs Global Investment Research
Bond Flows The current interest rate environment has created an attractive landscape for bank loan funds, driving robust inflows. Image: Deutsche Bank Asset Allocation
China – Nominal GDP Growth vs. 10-Year Government Bond Yield The persistent drop in bond yields is often seen as a sign of increasing investor caution regarding economic growth, which does not bode well for China’s nominal GDP growth moving forward. Image: Alpine Macro
Bonds Flows Since January 2024, there has been a notable trend of strong inflows into bond ETFs, particularly high-yield bonds, driven by favorable yield conditions and an overall “risk-on” sentiment in the market. Image: J.P. Morgan
U.S. Corporate Bond Spreads U.S. corporate bond spreads are currently at historically tight levels, suggesting potential bubble-like conditions. While a major correction is not guaranteed, several factors indicate rising risks in the first half of 2025. Image: Alpine Macro