THE ONE THING
Credit is quietly sending a signal that equities are not. The high yield bond ETF slipped 0.26 percent while the S&P 500 barely moved, and the 10-year Treasury yield is still 5.22 percent. When stocks hold steady and credit softens, it is worth asking clients whether their income holdings are carrying more rate and spread risk than they realize.
MARKET SNAPSHOT
| S&P 500 | 7,805.45 | -0.02% vs prior close |
| Russell 2000 | 276.70 | -0.43% vs prior close |
| Nasdaq 100 (QQQ) | 743.57 | -0.33% vs prior close |
| Gold (GLD) | 381.67 | -0.13% vs prior close |
| High Yield (HYG) | 77.09 | -0.26% vs prior close |
NEXT BIG NUMBER
The number to watch is the 10-year Treasury yield at 5.22 percent. The consumer price report is due this morning, and the reaction in yields will set the tone for stocks and credit through the rest of the week.
ADVISOR TIP OF THE DAY
Ask each client which part of their income comes from bonds and which comes from equities, then check how both would hold up if yields stay near current levels. Most clients can describe their yield but not its source, and that is a useful conversation to start.