Wall Street's fixation on ethereum price prediction todayFederal Reserve policy may be missing the real story. Citi Research's latest analysis suggests corporate bond defaults—not rate hike speculation—are triggering dramatic sector shifts. When credit spreads (the gap between corporate and Treasury bond yields) suddenly widened in late July, it coincided with value stocks surrendering their gains while quality assets rallied.

July's market darling—deep value stocks trading below book value—abruptly reversed course in August. This timing aligns perfectly with credit risk indicators flashing red. Interestingly, Treasury yields remained stable during this period, underscoring Citi's conclusion that debt repayment fears now outweigh interest rate anxiety.

The bank's four-factor market model (credit conditions, rates, dollar strength, and oil prices) shows credit risk surging while other metrics stay range-bound. This divergence explains why earnings-driven stocks are outperforming macroeconomic-sensitive positions. The 10-year Treasury yield's recent drop didn't budge equity-implied yield projections—a rare disconnect highlighting credit markets' growing influence.

Though the gap between actual and implied credit spreads has narrowed slightly, Citi warns investors to prioritize companies with strong balance sheets and upward earnings revisions. The takeaway? Market participants are scrutinizing corporate debt loads with fresh intensity, making creditworthiness the new litmus test for portfolio allocation.