When Junk Bond Spreads and Stocks Diverge

By Elliott Wave International

What happens when junk bond spreads and stocks stop moving in sync? This excerpt from Elliott Wave International's July Financial Forecast explores a divergence their analysts are watching closely.

EWFF has long noted that junk bond credit spreads and stocks tend to trend and reverse together. In the event of bankruptcy, junk debt is one rung above equities in the pecking order of who gets paid. When the trend between the two assets diverges, it is meaningful.

"[The chart below] shows the S&P 500 and the CCC-rated junk bond spread, which is the yield on CCC-rated debt — debt that has a high risk of default — minus the yield on comparably dated U.S. Treasuries. To align junk debt spreads with the S&P, we inverted its scale.

… Starting in late January, [junk bond spreads] widened sharply. … Equally important, the widening in junk spreads has broken a trendline from October 2022. … This is just one of many signals EWI's analysts are tracking.

See 18 more red flags inside EWI's newly updated free report>>.

This article was syndicated by Elliott Wave International and was originally published under the headline When Junk Bond Spreads and Stocks Diverge. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Catching The 'Third of a Third' in AI BEFORE the Rest of the World

By Elliott Wave International

Paying attention is good. Knowing WHERE to pay attention is even better.

Leading market sectors often reveal what’s really happening beneath the surface.

In June 2017, Elliott Wave International's Global Market Perspective showed this chart and wrote:

“Leading sector indexes often provide important evidence to support or even to inform a wave count for the broader market. Nothing could be truer right now for the MSCI Emerging Markets Asia Infotech Index.

The index is leading Asian stock markets higher in a third-of-a-third-wave advance.”

What exactly did that imply?

A third wave is typically the strongest phase of a market advance. A third wave within a larger third wave—often called a “third of a third”—is where trends can accelerate dramatically.

What happened next?

As of June 2026, the MSCI Emerging Markets Asia Infotech Index has risen from roughly 500 to more than 3,500 — as in, a $10,000 investment would be worth close to $70,000.

That’s the value of paying attention in the right place.

Every month, EWI's Global Market Perspective analyzes more than 50 global markets—including stocks, commodities, currencies, bonds and emerging markets—to identify potential opportunities and risks across the globe.

The question isn’t what Global Market Perspective said in 2017.

The question is: What opportunities is it identifying today?

Subscribe to GMP today and find out >>.

Or, if you'd like to learn to spot third wave setups in your charts, this handy free resource teaches you the Elliott Wave basics in just 30 minutes >>.

This article was syndicated by Elliott Wave International and was originally published under the headline Catching The 'Third of a Third' in AI BEFORE the Rest of the World. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.