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Steady Stock Market Leadership Despite Spreading Virus

February 14, 2020
Steady Stock Market Leadership Despite Spreading Virus

The headlines have been dominated by the worldwide spread of the coronavirus from China and certainly markets remain uneasy about it, even though the Standard & Poor’s 500 index (SPX) surprisingly continues to hit highs. Why is that? For one thing, the U.S. equity market is viewed as a safe haven, at least as far as global equities are concerned.

For example, some anxiety can be seen in one of the two markets I tend to rely on: the so-called “fear index” VIX and the high-yield corporate bond market. I view these markets as important to confirming overall asset market trends. The VIX has largely returned to normalized levels – sub-15. This is less the case for high-yield, but I am basically attributing this to the fact that bond market is beginning to price in future rate cuts later this year.

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