Volatility, Liquidity, Stability, Uncertainty, and Quality

As pandemic mitigation swept the country, fiscal stimulus and liquidity provided some welcome relief in the deepest contraction since the Great Depression. Yet, the confluence of very good performance by risk assets and haven assets signaled ongoing deep-seated problems with the economy. We would caution that the #Fed can solve liquidity problems, but it’s not in a position to address solvency problems, which we think remain a significant risk within the credit markets and particularly within the non-investment grade sectors of the corporate bond market. All Fed liquidity does is buy time; it doesn't create revenues or cash flow, and we've got to pay close attention as that story plays out.

Snapbacks, Agility, Rising Defaults, and Focus on Quality

We believe the loan market is attractive and under-appreciated as the average price of the market sits at $91.70, while spreads remain elevated at 636 bps. We also believe now is a good time to invest in high yield as a core investment or an income enhancement addition to a broadly diversified portfolio.