CIO High Yield, Portfolio Manager
• Quarterly outlook
Credit outlook: Comfortably Numb
As Pink Floyd reminded us with Comfortably Numb, detachment can feel safe in the moment – but it risks leaving us unprepared when reality finally breaks through. Credit markets today seem to embody that same paradox.
Authors
Matthew Jackson
Portfolio Manager
Top keywords
Summary
- Spreads are extremely tight, but investors remain upbeat
- Strong technicals provide ongoing support
- Focus on quality IG and disciplined HY exposure
Even Trump’s increasingly assertive influence over the Fed, once unthinkable, failed to shake sentiment. Downward revisions in labor market data, combined with leading indicators pointing to renewed inflationary pressure, have raised the odds of a stagflation scenario, yet even these developments have failed to dent risk appetite. After several false alarms, where spreads widened on recession fears that never materialized, investors feel little appetite to put on hedges again.
The result is a credit market that feels, to borrow from Pink Floyd, ‘comfortably numb’. Investors remain comfortably long, detached from risk, and seemingly indifferent to the warning signs around them. Complacency, it seems, has become the prevailing mood.
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