Tuesday, October 21, 2008

Are swaps forecasting a huge equity rally?

I've always been drawn to swap spreads as a leading indicator of other things (e.g., credit spreads, generic financial conditions, fear, health of the economy), so when I put together this chart I told myself to not get too excited, because it suggests that the big selloff in equity markets was just a temporary thing that will soon be almost entirely reversed. Wouldn't that be exciting?

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