“There Is No Corner To Hide”: $100 Billion Fund Manager Warns Credit Rout Is Just Starting

Wednesday, November 14, 2018
By Paul Martin

by Tyler Durden
Wed, 11/14/2018

One day after Jeff Gundlach warned in his latest webcast that much more pain is coming for the corporate bond market, echoing a similar warning made just hours earlier by Scott Minerd, who cautioned that “the selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun”…

… it was the turn of another fund manager to join the growing chorus of warnings about the coming credit rout.

Jason Shoup, head of global credit strategy at Legal & General Investment Management America which manages $186 billion including $100 billion in fixed income, told Bloomberg that rising rates, fading stimulus, weaker earnings and a coming tide of rating downgrades means that the worst year for investment grade in a decade is just the start of the bond slump and align to ensure that 2019 will be a tough year for US corporate credit.

“It just feels like a much more risky proposition than it did a year ago,” Shoup told Bloomberg in a phone interview: “There really is no corner in which you can obviously hide.”

While the fixed income manager expects a modest rebound in high grade bonds if issuance slows, Asian investors stop selling and stock markets stabilize, Shoup still sees next year as “dicey.”

“I wouldn’t be surprised if the second half of 2019 really poses some significant challenges and could result in wider spreads,” Shoup said. “Without that central bank support and transitioning off the fiscal stimulus, our long-term outlook for investment grade is definitely on the more bearish side over the last two to three years.”

The Rest…HERE

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