Quick markets thread

Have said for a while now that credit is the driving seat... The days of bond investors funding the hopes and dreams (buybacks etc) of equity investors is in the rear view mirror for now, as c-suite focus shifts to liquidity/debt obligations/ratings etc

Here's GS on what it all means for stocks

"S&P 500 firms will prioritize liquidity in 2020 leading to a 25% fall in dividends and a 50% drop in buybacks... Firms prioritizing buybacks have lagged YTD as investors reward firms reducing debt and those with strong balance sheets"

The increasing focus on liquidity and the higher rated companies who have relatively easier access to it/who can more easily endure the duration of this shutdown is opening up spreads on several levels... In both equity and credit markets alike.

We saw a bit of this in the price action of credit this week... Where despite record IG supply, high-grade spreads actually ended the week tighter whilst riskier high-yield credit traded marginally wider. Fed support in IG credit is playing a role here..

Typically Fed stimulus would lift all boats to some degree but but in this case it's arguably exacerbating increasing bifurcation. Establishing a 'follow the Fed' investor strategy and widening the gap between the haves and have nots.

Important if you're looking to signs of stabilization in credit to add to risk more broadly... Investors I speak to are still overwhelming focused on highly rated companies with strong balance sheets and access to the liquidity needed to get to the other side of all of this.

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