Extreme Correlation

This is the biggest band you'll find
It's as deep as it is wide
--The Who

In leveraged systems, selling builds on itself as margin calls drive investors to sell anything that isn't nailed down. That's what we're seeing. Everything's being sold--including  asset classes considered 'safe' (e.g., Treasuries, gold).

Correlations have spiked during recent rout, threatening to take out the GFC highs @SoberLook @BofAML @FactSet pic.twitter.com/WB4CyWBuRn

— Liz Ann Sonders (@LizAnnSonders) March 18, 2020

That means  correlations are going up as everyone scrambles to accumulate the single uncorrelated asset: cash. We're at correlations not experienced since the credit crisis.

When correlations reach extremes like this, we're probably late in the selling game. Many stocks I'm watching are beginning to resist further lows during selloffs.

I continue to be constructive and nibble around.