Taking Selective Risk in Credit

  • We get granular as the environment for risk-taking is supportive for now. That’s why we like euro area high yield credit, emerging market debt and U.S. stocks.
  • U.S. stocks soared to record highs again last week. Ten-year U.S. Treasury yields were largely unchanged but slightly below their 2024 highs.
  • We’re watching January U.S. payroll data out this week. A strong reading could confirm that still-high wage growth will stoke inflation, as we expect.

Getting granular and being nimble to seize opportunities in the new regime are key lessons guiding us. We heed that lesson as inflation falls and the Federal Reserve readies interest rate cuts. This more supportive backdrop for risk-taking anchors why we’re overweight euro area high yield credit, dollar-denominated emerging market debt and U.S. stocks. We had preferred investment grade credit but now eye fixed income where spreads haven’t tightened as much. We still like private credit.

Relatively attractive