The stock market is finally waking up to the fact that long-term interest rates are rising. If we get more confirmation soon that the trend for long-term interest rates has changed, it’s likely going to cause some more serious headwinds for the stock market. (That confirmation might come after this morning’s employment report.)
The HYG high yield ETF broke slightly below its trend-line from last October. Given that a divergence has developed between the S&P 500 and the HYG, if this breakdown is confirmed soon, it will raise the odds that this divergence will be resolved with a material drop in the stock market…rather than a rally in the high yield market.
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