Rising credit stress is increasingly impacting the US stock market, as widening credit spreads signal heightened default risk. The recent surge in bankruptcy filings, approaching post-pandemic highs, highlights the financial strain on companies. This situation is exacerbated by a steepening and disinverted yield curve, which has increased rates volatility and could stress corporate cash flows. As bond yields rise, borrowing costs escalate, putting additional pressure on corporate profits and potentially leading to declining stock prices. The VIX, a key measure of market volatility, is closely tied to these credit market dynamics, with increased bond volatility often coinciding with falling equity prices.
The iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) is currently priced at $46.91 as of 05:20 AM on Thursday, January 9.