Is the bond market trying to warn us?

The equity markets know for the time being to follow up the rising trend of the past year. At the end of the year 2017 we even had to deal with a higher acceleration and for the time being we are still at a very high level. On Wall Street the limit of 25,000 points was recently broken, but now the limit of 26,000 points must also be believed. Is this a guarantee for further rising share prices?

The bond market is currently showing a slightly different picture than Wall Street. The bond market has also been on the rise for months, but a hitch has recently come to the fore. Especially when we focus on the bond market with corporate bonds with a high return.

Bonds market also turned in direction in 2015

On the graph above, from Tom McClellan, it can be seen that a frightening divergence has arisen between the S & P 500 index and the corporate bond market with high interest rates. This bond market is particularly popular when investors dare to take the necessary risk.

This divergence also played a role in the stock market around the summer of 2015. At the time, the bond market also turned in direction, while the S & P 500 index initially increased even further. In the end, most equity markets were confronted with a substantial correction that could continue until the beginning of 2016.

Given that the bond market is now issuing another warning signal, it seems sensible to be on the alert for an unexpected correction.

Do you also fear a new share crash?