An Ominous Market Indicator Appears To Be Confirming The Dreaded Third Top

As @ParagonCap points out on Twitter, the S&P 500 is now outpacing inflation expectations even more than it did at the market tops of either 2000 or 2007.

The chart below shows that this divergence has been a couple years in the making at this point. However, in recent weeks, a lot of talk about disinflation and deflation has resurfaced.

After taking the prize as one of the worst performing asset classes in the first quarter, the commodity complex has become completely unglued in April. At the same time, there has been a big rally in Treasuries as investors position for a slowdown in global growth.

As the slide below explains, "Expectations of price increases (inflation) are a sign of potentially stronger demand growth and higher margins, which is a positive for stocks."

Arguably, the latest developments on the inflation front are not positive for stocks.