The Credit Signal: Week Two of Credit-Off as Utilities Jump 11.05% on the S&P 500
Weekly read on the JOJO.Index credit signal: still credit-off, utilities up 11.05% vs. the S&P 500 in four weeks, and high yield spreads 66 bps off their 12-month low.
The Credit Signal is a weekly read on one question: is the equity market telling credit to get defensive? Data through Friday, 10/30/2026.
The signal this week: credit-off, week two
No flip this week. The JOJO.Index stayed credit-off, in long Treasuries, for a second straight week. It moved there in the week ending Oct 23.
The reason is still utilities. Over the past four weeks, utilities gained 11.05% against the S&P 500. Zoom out and it is mixed: over 13 weeks utilities are still 1.37% behind, and year to date they are up 3.86% vs. 11.69% for the S&P 500.
I have always believed utilities lead. A sharp four-week run like this is exactly what the signal is built to notice. It does not say where markets go next. It says the equity market is leaning defensive right now.
What credit spreads are doing
High yield spreads were 326 bps on 10/29. That is 66 bps above the 12-month low of 260 on Aug 28, and still below the 10-year average of 383. Only 19.2% of daily readings in the full ICE BofA history on FRED have been tighter.
Spreads rose through October, from 312 on 9/30 to 340 on 10/22, then eased last week. Investment grade is at 89 bps vs. a 10-year average of 114. Spreads have moved off the lows. They have not repriced.
From the crisis file (backtested): the 2015 to 2016 oil and high yield bust
Backtested, 7/20/2015 to 2/11/2016, S&P 500 peak to trough. Oil collapsed and energy debt dragged high yield down with it. The S&P 500 fell 13.02%. High yield fell 11.47%. The JOJO.Index gained 6.64%, credit-off in 18 of 30 weeks.
The honest part: long Treasuries returned 14.79% over the same window, so the index kept less than half of the defensive move. In a slow 30-week grind, a weekly signal spent 12 weeks in high yield. These results are backtested and hypothetical; the index launched 6/14/2021.
The live scorecard
Live record, total return: 1 week +0.61%, 1 month +2.22%, year to date +0.18%, 3 years +31.09%, since the June 2021 launch -7.23%, or -1.39% a year.
The past month: S&P 500 -0.91%, high yield +0.73%, long Treasuries +5.64%. The bigger picture is still weak. 2022 cost the index 24.99% as long Treasuries, the defensive sleeve, fell 31.23%, and it sits 8.62% below its high. The full table is below, good and bad.
The JOJO.Index is the ATAC Credit-On/Credit-Off Index, administered by MarketVector, launched 6/14/2021. Results before launch are backtested and hypothetical, not actual performance. Indexes are unmanaged, have no fees and cannot be invested in directly.
Past performance is not indicative of future results. Regime history is a Lead-Lag estimate from daily index returns. Sources: MarketVector, Yahoo Finance, ICE BofA via FRED. Not investment advice.
The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. All opinions and views mentioned in this report constitute our judgments as of the date of writing and are subject to change at any time. Information within this material is not intended to be used as a primary basis for investment decisions and should also not be construed as advice meeting the particular investment needs of any individual investor. Trading signals produced by the Lead-Lag Report are independent of other services provided by Lead-Lag Publishing, LLC or its affiliates, and positioning of accounts under their management may differ. Please remember that investing involves risk, including loss of principal, and past performance may not be indicative of future results. Lead-Lag Publishing, LLC, its members, officers, directors and employees expressly disclaim all liability in respect to actions taken based on any or all of the information on this writing.
