Getting Granular: Equities Cheap vs. Credit?

We plot the path HYG & JNK have traveled against SPY over the past year in the chart below.

They have all tended to track together over the past year.

Just as equities appeared expensive vs. credit in 2Q12 in front of the market’s ~12% correction into June, they now appear relatively cheap vs. the this area of the capital structure.

For instance, HYG & JNK are testing/pressing above their annual highs from mid-September while the SPY is some ~300-400 bps below its high from the same period.

Credit signaling more upside to come for equities?

2012-11-30 SPY vs. JNK & HYG - Daily