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Investing , Interest Rates , Stocks

Alert: Here’s What a Key “Risk Gauge” Reveals

Why junk bonds have reached “a dangerous juncture”

by Bob Stokes
Updated: December 22, 2020

Here in December 2020, market risk is being largely dismissed.

For example, on Dec. 7, Yahoo News reported on the outlook of market strategists, including this one from JPMorgan:

After a prolonged period of elevated risks, the outlook is significantly clearing up.

There are other indications that many investors are ignoring risk.

Let's consider junk bonds -- a risk-asset like stocks, hence, they both tend to trend together.

This chart and commentary from our December Elliott Wave Financial Forecast give you insight into the behavior of junk bond investors:


Bond investors' optimism is at a multi-year extreme, concurrent with the sentiment extremes that exist for stocks.... After surging to a high at 19.45% on March 24, the yield on CCC-rated bonds, the riskiest tranche of junk debt, plunged to 7.61% yesterday, the lowest level since September 2014. The average yield for the Bloomberg Barclay's U.S. Corporate High Yield Index declined to 4.45% yesterday, a new record low...

Investors are piling into the debt of the weakest U.S. companies in a historic yield grab, even as the total number of year-to-date bankruptcies is the highest since 2009...

Yet, financial history teaches that when most investors are "throwing caution to the wind," that's the very time to be cautious.

Is anybody cautious?

Yes, but as far as we've been able to tell, just one group: insiders.

Here's commentary from the just-published December Elliott Wave Theorist:

The people who run companies have seen enough, and they are dumping stocks like moldy food.

The Theorist goes on to mention why you should pay particular attention to the action of insiders.

Get the full story by reading our flagship investor package now. Get started by following the link below.

A Classic Elliott Wave is Now Unfolding in the Stock Market

That's right -- it is indeed "textbook."

This high-confidence chart pattern signals how 2021 begins in U.S. stocks.

Our Dec. 14 Elliott Wave Theorist said this chart formation "has been in progress for a full month." Now, it's even closer to completion.

Get a full description of this pattern and learn what it suggests is just ahead for equities as you review our flagship investor package.

Follow the link below to get started pronto.


Forget the Fed -- Watch the Waves

The Federal Reserve, and to a lesser degree the European Central Bank, have dominated the conversation about interest rates lately. But watch our Interest Rates Pro Service analyst Ivo Zhelev apply textbook Elliott waves to forecast the price of the UK's Long Gilt -- and, by extension, UK interest rates -- without a single glance at central bank statements.

Why a U.S. Recession May Foil Economists’ Expectations

A recent survey reveals positive expectations for the economy by a group of "professional forecasters." Learn why you may not want to bet the farm on that expectation. This chart compares leading economic indicators around the time of past recessions with what's going on now.

Gold Mining Stocks Lead Gold Lower: What’s “Fundamentals” Got to Do with It?

In mid-April, gold mining stocks led by VANECK GOLD MINERS ETF turned down from one-year highs to 3-month lows in May. Gold followed, reversing from all-time highs on May 4 to multi-month lows on May 25. We don't need another "fundamental" explanation for why.