All eyes are on the Federal Reserve this week for signs of the U.S. interest rate policy in 2016 and beyond. However, Goldman Sachs analyst John Marshall has been watching the sell-off in the credit market instead. In a new report, he discusses what this recent drop means for the stock market.

Credit Divergence

In the past week, the credit market has been under selling pressure, but equity markets have remained relatively resilient.

“Credit spread widening usually has negative implications or equity, but we believe it is critical to estimate the degree to which the equity market has already priced the weakness to determine the potential risks to equity going forward,” Marshall explained.

High-Yield Equities Foreshadowing Credit Drop

According to Marshall, the 0.8 percent widening in the CDX HY 5Y is…

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