Transports Weekly Snapshot - VIX Returns To Correlation With High Yield Bond Spreads

For the seventh week of 2018 on February 16th, both transports and broader market indices improved strongly. The increase in equity market volatility and interest rates has been written about extensively over the past few weeks with some claiming a direct inverse relationship and further downward pressure on equities as a result. I am in the camp of focusing on high yield bond spreads and the close correlation with the CBOE Volatility Index (VIX). As such, recent impacts on equities are likely to remain temporal at best, with 2018 still offering another year of positive appreciation.
As this past week displayed, the VIX declined strongly and has reverted back to correlation with bond spreads. One can interpret this either way assuming that the recent VIX spike could still be an indication of rates climbing higher; or opposingly, assume that the VIX’s future fluctuations will be more tempered. In any case, a more temporal impact still offers equity market upside potential, especially when considering economic variables at play.

I manage the Lean Long-Term Growth Portfolio (LLGP). To date, performance stood at 0.2 percent, as highlighted in green. Market volatility has remained, but this past week saw a strong return to positive momentum. Whether this trend remains in place is uncertain, volatility may occur more so in 2018.
The three top performers remain the Fidelity Contrafund (FCNTX) and Nasdaq (IXIC) and the Vanguard 500 Index... Read more