U.S. Recession Probability Both the S&P 500 equity market and the corporate bond market reflect investor expectations that a U.S. recession is unlikely or at least of low probability in the coming months. Image: J.P. Morgan Flows and Liquidity
Junk and Investment Grade Credit Spreads Corporate bond yield spreads are often used as a gauge of financial market stress. They can provide insights into the likelihood of an economic downturn, but they are not foolproof predictors. Image: Real Investment Advice
Probability of U.S. Recession within a Year Based on the tight spread between the S&P 500 and BBB-rated corporate bonds, the risk of a recession in the United States within one year appears low. Image: J.P. Morgan
Annual Global IG Returns Will global IG corporate bonds offer positive returns in 2023? Image: BofA Global Research
BB HY Monthly Total Returns U.S. BB rated high yield corporate bonds have dropped sharply in January. Image: BofA Global Investment Strategy
Historical Default Rate and Recession Periods in the U.S. Default rates on high-yield corporate bonds have exceeded 10% over the past three recessions. Image: Altman-Kuehne and NBER
BBB Debt by Sector in the U.S. By sector in the U.S., financial institutions have the largest amount of ‘BBB’ debt: $744 billion. That’s 53% of investment-grade bonds in the United States. You may also like “The U.S. Corporate Bond Debt Rated ‘BBB’ Exceeds $3 trillion.” Image: S&P Global Fixed Income Research
U.S. High Yield Index OAS The credit cycle usually rolls over before equities do. For now, credit is not buying the equity stress story. U.S. high-yield OAS sits near 270 bps, still a long way from the 800 bps that typically signals recession risk. Image: Real Investment Advice
U.S. High Yield Credit Spreads Tight high-yield spreads signal strong market confidence, but they also raise red flags by potentially masking underlying vulnerabilities and feeding investor complacency by making risks seem less significant than they are. Image: Topdown Charts
S&P 500 Buybacks Relative to Index Market Capitalization A recovery in corporate earnings could lead to a rebound in buybacks this year. Image: Gavekal, Macrobond
Emerging Markets Exports Value and MSCI Emerging Markets 12m Trailing EPS Chart suggesting that EM corporate profits are linked to the global trade cycle. Image: Gavekal, Macrobond