In today’s briefing:
- Credit Markets and Risky Assets: Placing Bets on Fed Easing After Bifurcated 2022
- Has the Stock Market Reached Escape Velocity?
Credit Markets and Risky Assets: Placing Bets on Fed Easing After Bifurcated 2022
- The bulk of maturing corporate debt in 2023 is investment grade (IG), but speculative borrowers will begin to refinance debt due in 2025 later this year.
- Lingering uncertainty over US monetary policy should favour IG bonds over SG, but SG bonds have benefitted from supply shortages due to various primary markets shutting down during 2022.
- Fed Chair Powell believes policy has reached restrictive territory. Markets are discounting a policy rate cut in November, but the arrival of sticky inflation could easily prevent this optimistic outcome.
Has the Stock Market Reached Escape Velocity?
- Last week was a very data-heavy week, the market gods smiled on the bulls as most of the events resolved in bullish fashions.
- In the short run, the S&P 500 advance appears extended and it can pull back at any time.
- While the intermediate-term trend looks bullish, don’t be surprised to see a period of pullback and consolidation before stock prices can rise in a sustainable manner.
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