The Calm Before the Storm
I checked my portfolio this morning and thought: everything's fine. S&P at all-time highs, no panic, VIX at 14. My daughter Lena asked me: "Dad, why aren't you buying more now?" Good question.
Then I saw a number that immediately reminded me of 2008: Credit spreads at 2.88%. Sounds technical, but it's not. This is the number that tells you how much risk the market REALLY sees.
What Are Credit Spreads — Simply Explained
Credit spreads are the difference between the interest a safe government bond pays and what risky companies must pay. The lower this number, the less fear investors have of bankruptcies.
2.88% is brutally low. For comparison:
- 2008 Financial Crisis: Spreads at 21.82%
- 2020 Corona Panic: 10.87%
- Today: 2.88%
This means: The market believes the world is safer than before Corona. Seriously? After Middle East escalation, inflation, and the Fed still not done with rates?
What the Pros See — And What They're Doing
Here's where it gets interesting. While regular investors keep buying tech stocks, I'm seeing massive shifts today:
Institutional money is flowing out of tech, into defensive sectors:
- Utilities (electricity, water) +32% in September
- Healthcare (pharma, insurance) +28%
- Consumer Staples (basics like Procter & Gamble) +35%
These are the stocks you buy when you think: "Something unpleasant is coming."
And then last week's consumer data: Retail Sales +0.2% (expected +0.5%). People are spending less. This isn't a crash signal, but it's a caution signal.
My T-Share Lesson — I Was That Naive Once Too
I know the feeling. In 2000 I stood exactly there: T-share at 100 euros, everyone was buying, nobody saw risk. Spreads were low then too. "People's stock," they called it. Three years later it was at 8 euros.
The problem with low credit spreads: They don't show safety, they show complacency.
Historically, the same thing always happens:
- Spreads fall deep (everyone feels safe)
- Nobody believes it could be different this time
- Then comes the shock — and spreads explode in weeks
What This Means for Your Money
I'm not saying: sell everything. I'm saying: be careful with new money now.
If you have $10,000 in an S&P ETF and the market corrects 5-7% (that's the historical average after such spread lows), that's $500-700 in losses — on paper. Only a problem if you panic-sell.
What I'm doing right now:
- No new money in tech
- Small positions built in Utilities and Healthcare (Duke Energy, Johnson & Johnson)
- Cash position raised to 20% — if it really crashes, I can buy cheap then
My buddy Kalle texted me yesterday: "Everything's rising, why are you so cautious?" I told him: "Because I lived through the T-share. And because credit spreads don't lie."
What Pros Are Watching Now
If you want to be smart, watch these three things:
- Credit Spreads above 4.5% = serious warning
- Retail Sales below expectations for three months straight = recession possible
- VIX above 20 for more than a week = panic coming
We're not there yet. But we're closer than most believe.
Stay Calm. Stay Tuned.
Most important: no panic. Credit spreads can stay low for months. In 2007 they were deep, the crash didn't come until 2008.
But if you're asking today: "Should I still get in now?" — then my honest answer is: wait. Let the big money finish its rotation. Watch the consumer data. And when everyone starts selling, you'll be the one with cash who can buy cheap.
This isn't sexy advice. But it's the advice I wish I'd gotten in 2000.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Past performance is not an indicator of future results.