Credit is set to play a significantly bigger role in the future of returns
Central banks’ support will continue to provide stability to the sector but companies’ fundamental are deteriorating and defaults are rising, how to manage credit exposure in such environment?
In this panel discussion, our boutiques’ experts will look at opportunities and threats in the IG and HY spaces:
- How do you see the Covid/Vaccine situation, do you think the optimism is sustainable with such a deterioration in the US?
- The second wave of Lockdowns in Europe is less of a drag on the economy, but its length remains uncertain, how do you assess the recovery, what’s your growth outlook for 2021. Do you think rates will stay low?
- Brexit, but also renewed US-China trade tensions remain on the agenda, how big of a threat to markets?
- The ECB is likely to expand its PEPP and TLTROs at its December meeting, does it remain a catalyst for credit markets?
- The Fed has adopted a different strategy, it has been so far more a backstop than a structural buyer like the ECB, what do you think will be the Fed strategy in terms of asset purchases in 2021? With what impact?
- Governments have been massively issuing sovereign debt to provide extraordinary financial support to the corporate world. This fiscal policy support is very expensive and will likely start to diminish throughout 2021, can credit markets live without respiratory assistance?
- We usually say “Boring is good for credit”, but 2021 promises to be anything but boring. How do you position credit in your broader asset allocation, do you favor EU or US credit at this point?
- Defaults are rising but the search for yield is intensifying, how do you assess IG versus HY?
- Corporates have issued massively in 2020 to build liquidity buffers while earnings have been hit by Covid, but for now technicals have been outweighing fundamentals, how do you think fundamentals will evolve next year and do you think investors will pay attention?
- Defaults have been going up on both sides of the Atlantic but according to Moody’s they will remain way below 2009 levels, are you following this view and how do you take this into account in your investment process?
- Rating migration was mainly concentrated in HY post-Covid while IG was largely put on negative outlook by rating agencies, how do you factor in the rating dynamics in your portfolio at this point?
- Banks entered the Covid crisis much better capitalised than in 2008, while the leverage of the non-financial world was at record high-level pre-Covid. Yet policy support will likely manage to keep defaults of bond issuers low, but SMEs will suffer more affecting the banking sector and NPLs ratios. In this context do you favour Financials or non-financials?
Watch the replay or listen to the podcast of this insightful debate: