“Sometimes Junk Bonds can send key message about the stock market, per important rallies and declines, will this be another one? Is the weakness in Junk bonds of late any kind of message to respect or just noise???,” added Kimble.
There is a decent chance, however, that stocks can move higher exclusive of high-yield bonds. Over the past year, JNK’s correlation to the SPDR S&P 500 (NYSEArca: SPY) is just 0.606, according to State Street data.
As the chart below suggests, JNK has not been tightly correlated to some of the higher beta, more cyclical sector SPDRs over the past 12 months, either.
Chart courtesy: State Street Global Advisors. ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of HYG, JNK and SPY.