From Stocks to Bonds, the Bear-Market Signals Are Multiplying

Bloomberg
August 30, 2017

Risks are stacking up for markets attempting to recover from the latest provocation by North Korea and the mounting damage of Tropical Storm Harvey.

Citigroup Inc. strategists including Jeremy Hale cite “worrying developments” that may signal the approach of a correction in stocks, while Commerzbank AG finds growing evidence of bearish sentiment in bond funds. Here are some of the red flags:

Correlations

The pairwise correlations between the S&P 500 and its industry sectors have fallen near levels that preceded the last two bear markets, according to the Citigroup strategists. The previous downturns in stocks started when correlations re-established themselves.

Underperforming transport stocks are another concern. The Dow Jones Transportation Average, a gauge of airline, railroad and trucking companies, has fallen about 5 percent from its July 14 high. The index’s decline from its 2014 peak led a similar move in the S&P 500 by about seven months.

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This article was posted: Wednesday, August 30, 2017 at 8:23 am






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