High-Yield

We build a four-stage business cycle framework based on economic growth and capacity utilization, and then analyze historical returns for most major asset allocation decisions for each stage. Given that we are in the early recession stage (negative growth coupled and an overheated economy), our framework recommends a defensive positioning across all asset classes.

This week we present our Portfolio Allocation Summary for June 2023.

This week we present our Portfolio Allocation Summary for May 2023.

This report looks at the relationship between rate risk and credit risk and how it has changed over time. It also makes the case for favoring agency MBS within an underweight allocation to US spread product.

This week we present our Portfolio Allocation Summary for April 2023.

The Fed lifted rates 25 bps yesterday while also signaling that the tightening cycle is near its peak. We discuss the short-run and long-run implications for Treasury yields.

Depending on market volatility during the next few trading days, the Fed will either lift rates by 25 bps next week or pause its tightening cycle. Either way, the Fed’s hiking cycle is close to its peak but rate cuts won’t be coming anytime soon.

This week we present our Portfolio Allocation Summary for March 2023.

This report considers the outlook for the US corporate credit cycle based on a suite of economic, monetary and corporate health indicators. We conclude that both the default rate and US corporate bond spreads will grind higher during the next 6-12 months.