Economists are stuck looking at the world with a soft landing / hard landing framework, based on past recessions and anti-cyclical fiscal policy. Instead, the economy continues to show resilience, while fiscal deficits remain expansionary and the Federal Reserve Board stays relatively dovish. We see no landing and a larger risk of growth re-acceleration rather than recession. Adding to that, the potential return of a Trump administration will likely result in more fiscal expansion. This is a new environment, not a return to goldilocks. In this context, credit still offers attractive opportunities - but not everywhere. We see little value in high quality credit, which comes with record-low spreads and high duration exposure, and we see overcrowding in private credit markets. There is increased dispersion and opportunities in high yield capital structures since the start of the year. In just two months, several names have already come under pressure - for example, Intrum, Grifols, Atos and more recently, Altice France. We are long reflation, credit and dispersion. Aditya Aney and Brendan Breen from our investment team discuss this in our latest Credit Webcast: https://lnkd.in/geEpVSpK
Alberto Gallo, CFA’s Post
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Portfolio Manager and Senior Credit Analyst | High Yield and Convertible Bonds | Member Of The Board Of Advisors and Ambassador at MCF SDA Bocconi
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