Stock Market Expert Says Market Dynamic That Could Unravel Historic Rally Keeps Him Up At Night

Ryan Detrick, the chief market strategist at the Carson Group, has built a reputation in the financial community for being optimistic even during times of uncertainty. Although he is still bullish on the market, Detrick says to watch credit spreads as a sign that the rally could end.

Detrick joined Benzinga's “PreMarket Prep” Thursday morning and discussed recent volatility in the market. Even though September started on a rough note for stocks, with a 2% drop in the S&P 500 on the first trading day of the month, the market usually tends to move higher after a first-of-the-month sell-off.

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Detrick remained bullish on the market in 2022 and 2023 when most financial experts and economists warned of a recession and market downturn. But, Detrick acknowledged the market could experience some turbulence in the short term and flagged one dynamic to watch as a clue for a bigger market slide.

"I like to keep it simple, look at credit spreads," Detrick said. "Credit spreads have continued to show no major stress in the system, so until we see spreads blowing out more then I'd worry more."

What Is A Credit Spread? A credit spread is the difference in yield between two bonds of similar maturity but different credit ratings. It shows the risk of default: higher-risk bonds pay more interest than lower-risk ones. Investors seek a higher return for taking on more risk, widening the spread. Detrick argues that if the market was in trouble, those credit spreads would be wider than they are now.

Detrick also looked at which sectors and industries are leading and which are lagging. Detrick said that because we have more “offensive” sectors like financials leading gains, the market doesn't appear to be under tremendous pressure.

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Image courtesy of Ryan Detrick and Carson Group and Nicholas Cappello via Unsplash.