CDX Spreads Hit 9‑Month High, S&P Near Peak
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- CDX Index has climbed to a nine‑month high while the S&P 500 is within 5% of its all‑time peak, a combination that historically preceded a bear market in every instance over the past 20 years.
- Sentiment Trader notes that the CDX spread’s current range‑rank reading is near the upper end of its recent historical range, indicating genuine credit stress rather than statistical noise.
- Moody's Baa corporate bond index spread versus the 10‑year US Treasury yield has risen, and the chart shows rising yield spreads consistently coincide with lower annual returns for the S&P 500.
- Federal Reserve is slated to have its March 18 FOMC decision and updated dot plot digested by markets, influencing risk sentiment as credit spreads widen.
- High‑yield spread (Junk‑to‑Treasury) is expanding, signaling tightening credit conditions that historically precede lower corporate earnings and equity market downturns.
Why it matters: Investors in equities and corporate bonds face heightened risk as widening CDX spreads signal tightening credit conditions that historically trigger lower earnings and equity drawdowns; risk‑averse investors shift to Treasury assets, while borrowers encounter higher financing costs and tighter loan terms.
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