Markets, economy, stocks, growth, global, fixed income, international, asset classes
What investors should consider
We cut the chances of recession to 25% after a thaw in the trade war and a year of rate cuts; our forecast is for sub trend growth. Favored sectors include emerging market local currency debt and higher rated short-duration securitized credit.
In this paper, we assess the potential risks associated with such a strategy by stressing capital requirements using spread-implied ratings.
While tariffs remain a concern, the key issue is the degree—which we deem moderate—of U.S. recession risk. The current global backdrop makes the U.S. dollar unlikely to strengthen. Earnings growth expectations are modest, valuations are undemanding
Reaching for yield, which we define as buying bonds with wider spreads after controlling for sector and rating impacts, is a topic that frequently arises in the life insurance industry.