There’s a very important warning signal flashing in the financial market right now.

Despite the importance of this signal, few people know about it…even fewer are talking about it.

Don’t be one of the people who don’t understand the vital importance of the bond market and what it’s telling you right now.

This knowledge could help you avoid a huge hit to your net worth over the next 12-24 months. Here’s why…

Most investors focus on just one area of the investment market: Stocks. After all, stocks have a long track record of generating solid, long-term returns. Plus, the idea of owning shares in a small business that grows large – and making 500% along the way – can capture almost anyone’s attention.

But what most people don’t realize is that the bond market is far more important and far larger than the stock market. The bond market is where companies, countries, and individuals go to borrow money. For every $1 worth of stock outstanding, there’s $2 worth of bonds.

Take the U.S. for example. The total value of every traded stock is $23 trillion. That’s a huge number, but it’s around half the value of all the U.S. bonds outstanding. Between corporate bonds, treasury bonds, mortgage bonds, and other varieties, there’s $40 trillion worth of bonds outstanding in the U.S.

Stock investors share in a company’s future profits. They’re optimistic by nature.

Bond investors are pessimists. They only get a promised rate of interest. That rate is usually fixed, so the bond investor doesn’t care about the promise of big profits. While stock investors daydream about the future, bond investors study the borrowing entity’s ability to repay.

It’s this great focus that makes bonds the ultimate canary in the financial coalmine. The bond market spots trouble long before the stock market wakes up to find it’s already here.

There are two types of corporate bonds: Investment grade and junk. Investment grade bonds are issued by the most financially sound companies. Junk bonds are issued by companies with weak financial positions. They are riskier than investment grade bonds.