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    Weekly Market Outlook: Richly Valued Equities Offset Record High Ratio of Corporate Debt to GDP

    Following Jerome Powell's testimony of December 11, Moody's long-term Baa industrial company bond yield fell to 3.98%, which was its lowest close since the 3.95% of August 28, 2019.

    December 2019 Pdf John Lonski, Katrina Ell, Barbara Teixeira Araujo, Andrew Pak, Ryan Sweet, Steven Shields

    Concerned With Forecast Uncertainty in CECL? Look Beyond the Baseline

    Using multiple scenarios in CECL can temper some of the volatility in the economic forecasts – the part that results from our inability to forecast the economy with complete precision.

    Weekly Market Outlook: Return of Christmas Past Does Not Impend

    More than 20% of the European Union's population is at least 65 years of age. Partly because of an unprecedented aging of the EU's slowly growing population, the average annual rate of economic growth for the EU has slowed from the 2.7% of 2004-2007 to the projected 1.2% of 2019-2020.

    December 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez

    Wholesale Used-Car Price Report: 2019Q3

    Auto retention values were not immune to the slowdown in the U.S. economy in the third quarter. Wholesale used-vehicle value retention dropped 1.7% in September on a year-over year basis. This at a time when U.S. economic growth slowed from 3% a year earlier to about 2%

    November 2019 Pdf Michael Brisson

    Weekly Market Outlook: Next Plunge by Profits to Drive Leverage Up to 2009 High

    U.S. business activity has not been exceeding its reach, and that will help extend the long-lived bull market and record-long economic recovery.

    November 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Ryan Sweet, Steven Shields

    The Pros and Cons of Rent Regulation

    Our findings conclude that the recent rent regulations passed in three states will likely not have a material impact on supply growth – for either affordable housing or for market-rate apartments. This means that landlords and investors concerned with market-rate apartments are not likely to change investment or development behavior.

    November 2019 Pdf Barbara Byrne Denham

    How Will Climate Change Impact Banks?

    We look at climate risk and consider how a heating planet might impact a bank's performance

    November 2019 Pdf Dr. Tony Hughes

    Weekly Market Outlook: Corporate Bond Issuance Reflects Business Activity's Heightened Sensitivity to Rates

    For January-October 2019, the corporate bond issuance by U.S. based businesses grew by 12.4% year over year to $871.0 billion for investment-grade obligations and increased by 15.2% annually to $186.5 billion for high-yield offerings.

    November 2019 Pdf John Lonski, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez, Andrew Pak

    Weekly Market Outlook: Equities Advanced for 95% of the Yearly Declines by High-Yield Bond Spread

    The market value of U.S. common stock has been setting new record highs. However, U.S. corporate credit spreads for both bonds and loans have yet to approach their lows of the current business cycle upturn, never mind their existing record lows.

    November 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Weekly Market Outlook: Improved Market Sentiment Is Mostly Speculative

    The dreaded inverted yield curve is gone, but perhaps not for long. Following October 30's paring of the federal funds rate's midpoint to 1.625%, the fed funds rate is less than the recent 1.68% 10-year Treasury yield for the first time since May 2019.

    October 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Michael Ferlez, Ryan Sweet

    Weekly Market Outlook: Loans Impart an Upward Bias to High-Yield Downgrade per Upgrade Ratio

    The credit rating revisions of loan-only high-yield issuers reveal a higher frequency of rating downgrades compared to issuers with outstanding high-yield bonds.

    October 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Steven Shields, Ryan Sweet, Mark Zandi

    Searching for Opportunity in the Land of OZ

    The Opportunity Zone (OZ) program offers substantial federal tax incentives in exchange for capital investment in under-resourced areas. This creates challenges for investors, policymakers and other stakeholders when trying to evaluate the more than 8,700 Opportunity Zones in their entirety. In this paper, we leverage our opportunity zones

    October 2019 Pdf Dan White

    Weekly Market Outlook: VIX, EDF and National Activity Index Go Far at Explaining the High-Yield Spread

    There is no one way of statistically explaining the bond yield spreads of high-yield corporate bonds. However, one of the better approaches employs a multi-variable regression model and generates a highly significant adjusted r-square statistic of 0.89.

    October 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Michael Ferlez, Ryan Sweet

    2020 Presidential Election Model

    The economy may not be top of mind for voters in every election, but it is hardly ever further than a close second. This is the principle underpinning Moody's Analytics presidential election models.

    October 2019 Pdf Mark Zandi, Dan White

    Canada Housing Market Outlook: The Fundamentals Start to Pull

    Canada's housing market seems on course for a soft landing given the lack of deterioration in mortgage debt arrears so far.

    October 2019 Pdf Andres Carbacho-Burgos

    Conservative Banks Do Not Need Conservative Models

    When banks manage risk, conservatism is a virtue. We, as citizens, want banks to hold slightly more capital than strictly necessary and to make, at the margin, more provisions for potential loan losses. Moreover, we want them to be generally cautious in their underwriting. But what is the best way to arrive at these conservative calculations?

    October 2019 Pdf Dr. Tony Hughes

    Weekly Market Outlook: Worsened Fundamentals Lift Downgrades Well Above Upgrades

    Financial markets have been buffeted by changing views regarding the trade dispute between China and the United States. Nevertheless, the direction taken by earnings-sensitive securities will ultimately be determined by the outlook for profits.

    October 2019 Pdf John Lonski, Ryan Sweet, Steven Cochrane, Katrina Ell, Barbara Teixeira Araujo, Andrew Pak, Steven Shields

    Weekly Market Outlook: Next Recession May Lower 10-year Treasury Yield to Range of 0.5% to 1%

    Despite today's ultra-low yields, Treasury bonds may still pay off handsomely once recession strikes.

    October 2019 Pdf John Lonski, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez, Andrew Pak

    Vietnam Economic Outlook: Tiptoeing Toward the Winner's Circle

    Despite risks to the downside, the country will remain one of the world's fastest-growing economies.

    September 2019 Pdf Steven Cochrane, Steven Shields

    Weekly Market Outlook: Abundant Liquidity Suppresses Defaults

    Nothing quite increases the risk of debt repayment like a drop in the income that funds the servicing of outstanding debt.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Chilean Corporates Well Equipped for a Crunch

    High levels of foreign direct investment lower the risk of corporate leverage.

    September 2019 Pdf Moody's Analytics

    Weekly Market Outlook: Cheap Money in Action

    The corporate bond market has proven to be resilient amid recent equity market volatility. Moreover, despite a slew of bearish headlines, the market value of U.S. common stock's latest low of August 14 was still a huge 20.8% above its low of December 24, 2018, while August 2019's month-long average of 19.0 points for the VIX was well under the 25.0 points of December 2018.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Model Validation Need Not Be a Blood Sport

    The traditional build-and-validate modeling approach is expensive and taxing. A more positive and productive validation experience entails competing models developed by independent teams.

    September 2019 Pdf Dr. Tony Hughes

    Weekly Market Outlook: Bond Implied Ratings Hint of More Fallen-Angel Downgrades

    On September 9, the senior unsecured bond rating of Ford Motor was lowered from Baa3 to Ba1, where the downgrade constituted a ratings reduction from investment- to speculative-grade (or high-yield). Because investor mandates often prohibit the inclusion of high-yield bonds in investment-grade portfolios, such a downgrade can quickly lower the prices of adversely affected bonds.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Evaluating Senator Warren's Social Security Reform Plan

    This brief paper outlines Senator Warren's reform plan and evaluates its actuarial, macroeconomic and distributional impacts.

    September 2019 Pdf Mark Zandi

    Trade War Chicken: The Tariffs and the Damage Done

    Based on simulations of the Moody's Analytics model of the global economy, this paper examines the consequences for the U.S. and global economies in different scenarios regarding how the trade war between the U.S. and China will unfold.

    September 2019 Pdf Mark Zandi, Jesse Rogers

    Weekly Market Outlook: Leading Credit-Risk Indicator Signals A Rising Default Rate

    The month-long average for the expected default frequency metric of U.S./Canadian high-yield issuers climbed from August 2018's 2.38% and July 2019's 4.16% to 4.59% in August.

    September 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Michael Ferlez

    Weekly Market Outlook: Upon Further Review, Aggregate Financial Metrics Worsen

    The Bureau of Economic Analysis recently lowered its estimates of corporate profits for 2017 and 2018. The downward revision of nonfinancial-corporate profits mostly stemmed from a major upward revision of employee compensation costs and a slight downward revision of nonfinancial-corporate gross value added, where GVA is a proxy for revenues net of non-labor costs.

    August 2019 Pdf John Lonski, Yukyung Choi, Katrina Ell, Barbara Teixeira Araujo, Ryan Sweet, Steven Shields

    Tip of the Iceberg: The Global Ramifications of a China Debt Crisis

    A hard landing in China remains a looming threat to the global economy and especially to the rest of Asia. This paper considers the consequences of a China debt crisis for the Chinese and global economies, with a special focus on Southeast Asia and emerging markets.

    August 2019 Pdf Steven Cochrane, Jesse Rogers

    A Comparative Analysis of Household Credit Data From the New York Fed and Moody's Analytics

    The importance of accurate and timely data on household credit conditions became clear during the global financial crisis. Quickly rising delinquencies and foreclosures should have been a warning to lenders and regulators to significantly tighten the spigot on new lending that was wide open during the pre-crisis boom. However, partially due to data limitations, many financial institutions were surprised by the weakening of household balance sheets. By the time they realized the severity of the problem, it was too late to act.

    August 2019 Pdf Michael Brisson, Dr. Deniz Tudor
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