High-Profile Sectors Start to Roll Over
The comments above & below is an edited and abridged synopsis of an article by John Rubino
Long credit cycles like the current one always end with a crash, but first they deteriorate. The headline numbers remain positive while under the surface a growing list of sectors start to falter. It’s only when the latter reach a critical mass that market psychology turns dark.
This process is quite far along, it seems, as some high-profile industries roll over: Delinquency rates for subprime car loans have ticked up to levels last seen in 2007; used car prices have crashed to the lowest level since 2009 amid a glut of off-lease supply; junk bonds have slumped as a bigger unwind looms; buyback levels of US stocks are plunging; and as for retail stocks, the worst is yet to come.
Whether this is enough to break through the complacency won’t be known until after the fact, but it does fit the historical peak-cycle pattern of sub-sectors faltering before the broader economy.