Just when you thought the 8 year bull market for US stocks had shown us everything, something new comes along.
One sector just posted a negative daily price correlation to the S&P 500 over the last month, the first time any industry group has managed that since we started tracking the data in October 2009. The lucky sector: Utilities, with a -25% price correlation AND a positive 2.5% return over the month. That’s not as good as the S&P 500 ( 3.0%), but still a reasonable gain for a negatively correlated asset. Overall, sector correlations remain low with an average of 57.1% to the S&P 500 and only 3 sectors over 80% (Industrials, Technology, and Financials). And as geeky as this all sounds, it is important if you want to understand why the CBOE VIX Index is so low. Lower correlations dampen price volatility for the S&P 500, with a feedback loop into expected volatility (which the VIX measures).
Bottom line: want to see the VIX ramp higher? Better hope correlations start to increase soon.
Bedazzled. Swagger. Addiction. No, those are not descriptors of an insufferable teen pop icon in rehab. They are all words invented by William Shakespeare, who seemed to have a middle schooler’s creativity for creating new words when he wasn’t happy with the ones already in circulation. Other examples: eyeball, manager and assassination. For more details (and other Shakespeare-invented vocabulary) see here.
This post was published at Zero Hedge on Mar 9, 2017.
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