Investing.com -- Stocks continue to decline in what Raymond James describes as an “orderly sell-off,” with major indexes down about 2% over the past week and “little sign of capitulation yet.”

Analyst Tavis McCourt wrote in a note that energy and utilities have been the clear outperformers since the war began, while cyclical sectors have borne the brunt of the retreat amid rising Treasury yields and risk-off sentiment.

According to Raymond James, the key to any capitulation moment lies not in equities but in the bond market.

McCourt said “the equity market will follow the credit market, which will follow the oil market’s lead,” adding that credit spreads have only widened modestly and remain far narrower than during past stress episodes, including the yen carry trade unwind and the Russia-Ukraine shock.

He argued that spreads are “not even in the same zip code as being consistent with meaningful recession chance in the U.S.”

The firm also warned that the bond market often misfires during exogenous shocks.

McCourt wrote that initial bond moves since COVID have “almost always been 180 degrees wrong,” citing the early weeks of the Russia-Ukraine war when 10-year yields dropped 23 basis points before rising as much as 300 basis points later in 2022.

The current 27-basis-point rise in the 10-year yield may prove premature as well.

McCourt added that the cyclical economy is “clearly improving,” pointing to accelerating durable goods orders and steady consumer spending.

But until the Strait of Hormuz stabilises and credit spreads widen more meaningfully, he suggested investors should not expect a full capitulation in equities.