The Accrued Interest blog, which usually confines its attention to the bond market, can't figure out why stocks haven't fallen even more. When interest rates on corporate bonds (corporate spreads)  diverge from interest rates on Treasuries, as they are doing now, the bond market expects a downturn. Yet there is no signal of comparable magnitude from stocks. Here is Accrued Interest:

A disturbance in the Force

I don't comment about the stock market very often, but something isn't right. Take a look at the chart below. The S&P 500 is in red, charted on the left axis. Corporate bond spreads are blue and are inverted on the right hand axis. Thus when the blue line "falls" that should mean the economic picture is deteriorating. From my seat, watching corporate bond spreads widen dramatically over the last 6 months, you'd certainly think recession is on the horizon. In fact, if you draw a horizontal line from where we are now in corporate spreads, you'd see that we've rarely been wider than current levels. We are wider than the worst points during the 1991 recession and 2001 recession, although we did touch a bit wider during 2002. And yet the stock market is very near all-time highs. I did this graph up through 12/31, so the S&P would be a bit lower. But the basic story would be exactly the same: the stock and bond markets don't agree about where we're going next.