As Covid-19 restrictions ease and the global economy begins to reopen, the current state of the high-yield market is in a unique position. Top of mind issues for credit investors now include rising rates and inflation, challenges that have been dormant for years. The mix of encouraging economic data and seemingly challenging valuation levels further complicates the picture. In this article, we give an overview of current market dynamics and highlight a few points institutional investors in high yield may want to consider.
This paper explores:
- How current economic forces could influence the medium-term outlook and discuss the potential consequences on total returns
- Changes in the composition of the asset class since the global financial crisis and what this means for valuations
- Pitfalls to taking a tactical allocation approach to the asset class
- Opportunities outside the domestic high-yield market