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Enter the ‘Twilight Zone’ as Stock Nightmares Meet Credit Dreams

  • Traders pay up for quality balance sheets as junk rallies
  • Goldilocks markets at risk of shift in growth, earnings cycle
Pedestrians exit a subway station near the New York Stock Exchange.
Photographer: John Taggart/Bloomberg

By one measure, it’s been decades since stock traders were willing to pay so much for the strongest companies out there -- just as credit investors rush to the weakest balance sheets.

U.S. firms with solid financials now trade close to the highest valuation relative to their fragile peers since the dot-com era of 2003, according to Goldman Sachs Group Inc. indexes.