Market risk is rising.
Our Financials analysts Josh Steiner and Jonathan Casteleyn highlighted this morning that the TED spread, the 3 month US Treasury Yield minus 3 month LIBOR (a proxy for risk), has nearly doubled in the past month or so.
The TED Spread is just one more market measure confirming our thinking about rising risk and volatility. Our macro team recently pointed out in our Q1 2016 Macro themes deck that a bear market for equities could be in the offing.
To be clear, the TED spread is still well below 2011 levels and pales by comparison to the jarring spike seen during the throes of the financial crisis. As Hedgeye CEO Keith McCullough points out, "Don't think about risk in terms of absolutes - rate of change is what matters most."
As Keith likes to say, "Risk happens slowly at first, then all at once."
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To read our Financials and Macro team's non-consensus institutional research ping sales@hedgeye.com.