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Green Shoots, Meet Lawnmower

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The economy's likely to remain choppy for the next 12 to 18 months.

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Spreads have been quite resilient lately given the last 3 weeks of equity market action. The corporate investment-grade (IG) action speaks to more of a "no growth with heightened risk" scenario.


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High-yield (HY) is also saying the same, yet still pricing in a much higher than normal implied level of risk -- although nothing like it was in the first quarter. HY spreads are by far the most important to focus on at the moment.


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However, one thing stands out like a sore thumb. Take note of where IG and HY spreads have seemingly flattened out at just above the September '08 levels. Traveling back in time, September 2008 was the month when the @#&% was hitting the finance fan. Banks (of all sorts) and those formerly known as broker dealers were at DEFCON 1 with no eject button in sight.

The House of Representatives also threw in their 2 pesos by initially rejecting TARP. It's no coincidence that a lot of sector indices have also found serious resistance at their respective September '08 levels. The NASDAQ's a good example of that.

Muni spreads are still nasty.


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No positions in stocks mentioned.
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