Since the Asia crisis, most countries in Asia have displayed a longer term secular trend of falling default risk.
In the last twelve months, however, we have seen a significant uptick in equity market volatility in both the US and China, the world’s two largest economies by GDP. Rising credit risk is also apparent from these and other developments in both countries. A key question for investors is whether firms with lower levels of credit risk are likely to outperform during the next turn in the credit cycle.
In this 1-hour webinar, our experts present research showing that firms with high credit quality risk and high default risk have tended, on average, to systematically underperform their peers in multiple equity and bond markets spanning the US and Asia. We discuss the impact of shifting yield curves on CreditEdge factor-based strategies as well, and highlight the role of credit risk signals for early warning at the sector level.
- Sam Malone, Director of CreditEdge Research
- Yuki Choi, Associate Director
Questions? Email: MA-Webinars@moodys.com
Not only has the market value of U.S. common stock set a new record high, so have the core pretax profits of U.S. corporations.
Corporate credit has largely recovered from the terrible slump prompted by COVID-19. In general, corporate bond yield spreads are now the narrowest since February 2020.
COVID-19 will determine the near-term fate of the U.S. and world economies in 2021. If resurgent coronavirus infections prompt another broad shutdown of businesses, US real GDP will again contract sequentially. At the other extreme, a vaccine for the virus would significantly enhance 2021's outlook.
Republican control of the U.S. Senate and Democrat control of the House effectively precludes radical changes in the U.S. tax and regulatory framework.
The latest sell-off of equities anticipates a meaningful widespread drop in business sales brought on by COVID-19's second wave.
U.S. business activity may have lost some of its earlier unsustainable momentum, but the ongoing growth of expenditures weighs a renewed contraction of sales and profits.
Though unresolved issues stemming from COVID-19 warn of substantial tail risk, investors have become more tolerant of above-average risk according to the recent narrowing of corporate bond yield spreads.
The declining trend of initial state unemployment claims persists.
The Congressional fight over additional fiscal stimulus goes on. The Democrats propose an additional $2.2 trillion of deficit spending, while the Republicans have offered $1.6 trillion
Corporate bond issuance by U.S. companies continues to boom.