My “JOJO Index” stayed credit-off for a second straight week. It moved there in the week ending Oct 23. It also says the equity market is leaning defensive right now, notes Michael Gayed, editor of The Lead-Lag Report.
The reason is still utilities. Over the past four weeks, utilities gained 11% against the S&P 500 Index (^SPX). Zoom out and it looks more mixed. Over 13 weeks, utilities are still 1.3% behind, and year-to-date they are up 3.8% vs. 11.6% for the S&P 500.
I have always believed utilities lead. A sharp four-week run like this is exactly what my signal is built to notice. It does not say where markets go next.
Meanwhile, high-yield spreads were 326 basis points on Oct. 29. That is 66 bps above the 12-month low of 260 bps on Aug. 28, though still below the 10-year average of 383 bps. Only 19.2% of daily readings in the full ICE BofA history on FRED have been tighter.
Overall, the bigger picture is still weak for risk markets.
