All the same, it may be hard to shake the fear. The so-called smart money invested in high yield has historically provided a reliable barometer on prospects for a slowdown, suggesting investors who dismiss signals from the asset class do so at their peril.
“Credit and equities are caught together in a vicious cycle,” said Geof Marshall, who oversees C$40 billion ($30 billion) of assets at CI Investments’ Signature Global Asset Management in Toronto. “Higher spreads, volatility and poor sentiment all drive financial conditions tighter which will slow economic growth and impact corporate earnings, which will eventually lift the default rate.”
This article was provided by Bloomberg News.