As you know, we continue to wait and watch for an opportunity to get more offensive when we see sustainable signs of improvement in the U.S. Treasury market, bank lending, financial conditions, and relative performance in the economically sensitive sectors like the S&P 500 Financial and Industrial sectors (Banks & Tanks). At this point, we continue to see the opposite taking place. While everyone is watching the S&P 500 (SPX) Index itself, the economic sensitive sectors are already in the process of testing their lows.
We need to see the trends in the above change before we take a more offensive view, but we again caution against becoming too negative. The main difference between the March low and today is the Fed has backstopped the corporate bond market and actually started buying yesterday. There has been a historic corporate credit new issuance in the Investment Grade market that has provided money for companies to weather the Covid-19 storm. Along those lines, we quantified what has happened in corporate credit since the 03/23 low – and we believe there still remains opportunity in the area the Fed told us they are buying.
Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expenses.
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