(Harvest) Just five weeks into the new year, stocks have taken a beating across the globe. Continuing a trend we saw beginning in early 2015, stocks of a small number of very large US companies have been the best place to be. Almost everything else — US small caps, other developed market stocks and emerging market stocks — has done poorly, with many segments already in bear market territory.
And, after initially reflecting concerns about the impact of the enormous decline in oil prices, spreads on high yield bonds have continued to widen across industries, reaching normal recession levels. Even spreads on high quality US corporate bonds have now reached a level typically associated with recessions. Conversely, investors have flocked to the perceived safety of US Treasury Bonds, driving yields down and prices up very significantly.
