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HY Stages Quiet Rally; VIX Term Structure Normalizes

August 23, 2019
HY Stages Quiet Rally; VIX Term Structure Normalizes

While the stock market focused on the speech Friday by Federal Reserve Board chairman Jerome Powell (and was duly disappointed by his tamping down expectations for future rate cuts) and the US-China trade war, investors should also focus on other financial assets. In particular, a good question to ask is what does high yield bond market action, for example, mean for stocks? (For more on the Fed see page 6.)

What the Fed does or doesn’t do is a key input—and I’ll get to that in a moment—but I try to look at signals the market is ignoring, often at its own risk. This week the HY market is telling you something and investors should pay heed.

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