“[I]f credit spreads begin to widen in a sharp and sudden way, a correction in stocks becomes highly likely as a lagged response,” Gayed writes for MarketWatch.
“But it is not just junk debt,” he adds, pointing to the recent pullback in EMB, the emerging market bond ETF.
Gayed points out that credit spreads in emerging market debt are starting to widen. “While perhaps early, the fact that this is happening now is a concern,” he wrote.
iShares JPMorgan USD Emerging Markets Bond
Full disclosure: Tom Lydon’s clients own JNK, HYG and EMB.