David Rosenberg: The Era Of The Green Shoots Is Officially Dead

A recent note from Gluskin Sheff’s David Rosenberg does a nice job characterising the tenor of the market right now. As he puts it: The Era Of The Green Shoot Is officially Dead

What more can you say?  Back in April of last year, a -0.3% print on retail sales
would have been reason for celebration because it was widely seen as a
sequential improvement over -1.2% the month before.  Now, last Friday we saw
a +0.5% reading on the January sales figure, and the Dow drops 45 points. 
Good just isn’t good enough anymore for a market priced for perfection.  In a
real-life example, just take a look at what happened to the once-hot sports-bar
chain Buffalo Wild Wings — it just posted a year-over-year sales performance of
20% for Q4 and the stock price responded by sliding 13%.  

One source of reduced risk appetite may also be coming out of the fixed-income
market because high-yield bond funds suffered a huge $984 million net outflow
last week (largest redemption in five years) and new-issue activity was forced to
grind to a near-halt ($5.1bln from $32bln a week ago).  Not only has corporate
bond issuance slowed, but Bloomberg News reports that companies are either
cancelling or postponing planned debt placements at a pace we have not seen in
2½ years — 16 issuers covering an estimated $7.3 billion over the past month. 

In the past month, we have seen the biggest sell-off of U.S. junk bonds since the
equity market bottomed out in March 2009 — average junk bond yields have
surged nearly 100bps from their recent lows and stand at a nine-week high of
9.42%.  The net asset value of bond funds (Lipper data) fell $1.6bln last week in
light of the market declines and renewed redemptions, the largest such drop
since November 2008 as the credit meltdown was approaching a peak. 

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