- Aware thinks the big story is not which companies will see bonds downgraded, but rather that the corporate credit market looks more attractive than it has in 11 years.
- Spreads are 2.5 times greater than they were six weeks ago. Right now, investors are getting paid handsomely for the risk they are taking.
- Many of these companies have great business models and produce a lot of cash. Aware views this as a technical move that allows us to buy them on sale.
A lot of the material being written about the fixed-income market's correction examines which companies will see their bonds downgraded and the possible effect this will have. But, we think the big story is that the corporate credit market looks more attractive than it has in 11 years.
As we sit home amid the Covid-19 Pandemic, the outlook is scary because we have no idea how long the economy will be affected. The closest comparison we have is the Spanish Flu of 1918, a disease that spread rapidly and killed millions. Since the markets back then were not as developed as today, the past offers little guidance on what to expect. And this uncertainty is spooking markets.