In his daily note, Gluskin-Sheff economist David Rosenberg highlights what he describes as four points of nonconfirmation:
First is the gold price — it is trending higher in U.S. dollar terms and surging in
Euro terms and is a hedge against financial instability. Meanwhile, the stock
market is trading as if we have financial nirvana on our hands.
Second is the bond market — a hedge against deflation and here we still have
the 10-year T-note yield hanging around 3.7% whereas if we were truly in a
wonderful refationary cycle, it should be north of 4.5% right now.
Third, the action in emerging Asian markets, which are trading below their recent
highs, and especially China, which is actually now 14% below the nearby peak of
late 2009 (during which the S&P 500 has risen nearly 10%).
Fourth, there are some signs of a crack in credit quality. Global corporate
spreads have widened 6bps this week, to 149bps and high-yield spreads have
moved out 13bps, to 569bps. U.S. CDS spreads have also risen 5bps, to 94bps.
As we saw in 2000 and again in 2007, credit leads equities.
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