Why A Corporate Debt's Ticking Time Bomb Could Make A 2024 Recession Inevitable, Analyst Warns
Portfolio Pulse from Piero Cingari
Salman Ahmed, the global head of macro and strategic asset allocation at Fidelity International, warns of a potential recession in 2024 due to a wave of corporate debt refinancing. He suggests that the Federal Reserve's tightening of monetary policy and higher real interest rates could lead to an economic downturn. In anticipation, Fidelity International has adjusted its cash weighting and shifted to overweight. Cash-like ETFs such as SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) and iShares 0-3 Month Treasury Bond ETF (SGOV) saw a sharp influx of money in August. The firm also prefers investment-grade credit, as tracked by the iShares iBoxx $ Inv Grade Corporate Bond ETF (LQD), over high-yield credit.
September 01, 2023 | 8:44 pm
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The SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) saw a sharp influx of money in August, indicating investor anticipation of a potential recession.
The influx of money into BIL suggests that investors are preparing for a potential economic downturn by investing in short-term, low-risk assets. This could increase demand for BIL and potentially drive its price up in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
Fidelity International prefers investment-grade credit, as tracked by the iShares iBoxx $ Inv Grade Corporate Bond ETF (LQD), over high-yield credit, indicating a cautious stance on riskier assets.
Fidelity's preference for LQD suggests a cautious stance on riskier assets, which could lead to increased demand for investment-grade corporate bonds and potentially drive up the price of LQD in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The iShares 0-3 Month Treasury Bond ETF (SGOV) saw a sharp influx of money in August, indicating investor anticipation of a potential recession.
The influx of money into SGOV suggests that investors are preparing for a potential economic downturn by investing in short-term, low-risk assets. This could increase demand for SGOV and potentially drive its price up in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80