Topic Tags: Fixed Income - Below Investment Grade

2025 Halftime Market Insights

This video is a recording of a live webinar held July 17 by Marquette’s research team analyzing the first half of the year across the economy and various asset classes as well as themes we’ll be monitoring through the rest of 2025.

 

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

Featuring:
Greg Leonberger, FSA, EA, MAAA, FCA, Partner, Director of Research
Frank Valle, CFA, CAIA, Associate Director of Fixed Income
James Torgerson, Senior Research Analyst
Catherine Hillier, Senior Research Analyst
David Hernandez, CFA, Director of Traditional Manager Search
Evan Frazier, CFA, CAIA, Senior Research Analyst
Dennis Yu, Research Analyst
Amy Miller, Associate Director of Private Equity
Chad Sheaffer, CFA, CAIA Senior Research Analyst

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If you have any questions, please send our team an email.

Policy Uncertainty Blurs the Outlook

As we enter the second half of the year, Liberation Day-induced market volatility seems like a distant memory with the S&P hitting another all-time high on July 10th and non-U.S. stocks significantly outpacing their U.S. counterparts through June 30th. Meanwhile, the One Big Beautiful Bill was signed into law by President Trump on July 4th with varying expectations on its impact to growth but a consensus view that it will push the deficit higher.

In this edition:

  • Tariff and policy uncertainty
  • Risk factors and market indicators
  • Equity market drivers
  • Currency and regional trends
  • What to watch in the second half

1Q 2025 Market Insights

This video is a recording of a live webinar held April 16 by Marquette’s research team analyzing the first quarter of 2025 (and recent weeks) across the economy and various asset classes as well as themes we’ll be monitoring in the coming months.

Our Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real estate, infrastructure, private equity, and private credit, with presentations by our research analysts and directors.

Featuring:
Greg Leonberger, FSA, EA, MAAA, FCA, Partner, Director of Research
Frank Valle, CFA, CAIA, Associate Director of Fixed Income
Catherine Hillier, Senior Research Analyst
David Hernandez, CFA, Director of Traditional Manager Search
Evan Frazier, CFA, CAIA, Senior Research Analyst
Dennis Yu, Research Analyst
Hayley McCollum, Senior Research Analyst
Chad Sheaffer, CFA, CAIA Senior Research Analyst

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If you have any questions, please send our team an email.

 

Bracing for Stagflation

As markets swirl and stagflation fears mount, what should investors do?
Our newsletter last week outlined the broad context of President Trump’s new tariff policy as well as the most notable market impacts. Granted, the news seems to change daily, as does the market’s reaction; trying to pen a targeted newsletter is an almost worthless endeavor because by the time the ink has dried, markets have shifted due to another policy pivot. In the short term, the omnipresent cloud of uncertainty will continue to drive market volatility and investor sentiment. The best recipe for investors to weather this storm is patience and discipline, both of which can be difficult to come by in the current environment.

As we step back and take a longer-term view of the future, however, the threat of stagflation is becoming more realistic. Coined as a combination of the words “stagnation” and “inflation,” it is an economic backdrop characterized by high inflation, slow economic growth, and in some cases, high unemployment.

In this edition, we examine which asset classes are most exposed to stagflation and which can offer shelter.

Trade Turmoil: Assessing the Impact of Tariffs on Markets, the Economy, and Investors

The global trade landscape has been significantly reshaped by a series of aggressive tariffs initiated by President Donald Trump. These measures have elicited strong reactions from market participants and U.S. trade partners alike, leading to elevated levels of market volatility, souring economic sentiment, and strained diplomatic relations. While the situation is ongoing with major developments seemingly arising each day, this paper aims to summarize the events that have led to this point, detail the impact of the trade war on global markets, and provide commentary on what investors might expect in the months ahead.

New Year, New President…Same Outlook?

From an investor’s perspective, the current environment feels lot like it did twelve months ago: U.S. equity markets returned over 20% the prior year, fixed income is (still) offering attractive yields, and overall portfolio performance was positive for most programs. Nevertheless, nothing lasts forever and sentiment can shift on a dime. It is also likely that some of President Trump’s policies will have an impact on markets, with the specific impact varying by the policy and asset class.

In this edition:

  • U.S. Economy and Policy Expectations
  • Fixed Income: “If you liked it last year, you’ll like it this year”
  • U.S. Equity: Concentration risk still looms
  • Non-U.S. Equities: Positive earnings outlook, policy uncertainty
  • Real Assets: Real estate bottoms, infrastructure demand robust
  • Private Markets: Private equity on the rebound, private credit still compelling

2025 Market Preview Video

This video is a recording of a live webinar held January 16 by Marquette’s research team analyzing 2024 across the economy and various asset classes as well as themes we’ll be monitoring in 2025.

Our Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real estate, infrastructure, private equity, and private credit, with presentations by our research analysts and directors.

Featuring:
Greg Leonberger, FSA, EA, MAAA, FCA, Partner, Director of Research
Frank Valle, CFA, CAIA, Associate Director of Fixed Income
James Torgerson, Research Analyst
Catherine Hillier, Senior Research Analyst
David Hernandez, CFA, Director of Traditional Manager Search
Evan Frazier, CFA, CAIA, Senior Research Analyst
Dennis Yu, Research Analyst
Michael Carlton, Research Analyst
Chad Sheaffer, CFA, CAIA Senior Research Analyst

Sign up for research alerts to be invited to future webinars and notified when we publish new videos.

If you have any questions, please send our team an email.

Multi-Asset Credit: Taking Offense From Good to Great

Before the football season began, we authored a white paper that detailed offensive and defensive elements of a fixed income portfolio. For most investors, an aggregate (core) mandate provides defense while strategic allocations to high yield, senior secured loans, and emerging market debt (EMD) are the primary sources of offense. Relative to an aggregate benchmark, this structure has outperformed over market cycles. However, just as championship teams adjust and innovate throughout a season, so too should an investor’s portfolio.

Multi-Asset Credit (MAC) strategies are single portfolios that dynamically allocate across a broad range of global credit markets to provide higher levels of income and a diversity of fixed income exposures. These mandates can serve as a single-solution credit allocation or as a credit alpha overlay in the context of a broader credit portfolio. There is no perfect definition of MAC, but what they do offer is diversification, flexibility, and ease of access and operations. While these markets are not new, investors may be unfamiliar with the mechanics of a MAC strategy and its potential benefits.

This newsletter provides an overview of MAC, including the opportunity set, allocation structure and considerations, diversification benefits, and sample MAC manager performance.

A Damsel in Distress

An increase in defaults across below investment grade issuers, which are viewed as the weakest and riskiest, is often the “canary in the coal mine” that the economy is entering a downturn. Recently, below investment grade defaults have moved higher from record lows seen in 2021, fueled by defaults in the leveraged loan market. However, an increasingly greater share of defaults is coming in the form of distressed exchanges.

A distressed exchange is a type of out-of-court negotiation between a borrower and its creditors that occurs when the borrower is in danger of defaulting. The recent surge in the volume of distressed exchanges has come largely in the form of Liability Management Exchanges — or “LMEs” — which are voluntary proactive paths that primarily, but not always, distressed borrowers may take in lieu of a traditional default or restructuring. These types of transactions have grown in usage because of looser covenants and weaker protections on a company’s debt, particularly within the loan market, which can be seen in the above chart. On a year-to-date basis, distressed exchanges as a share of overall default volume are more than 60%, which is the highest percentage seen since at least 2000 when data became widely available. The year-over-year increase in distressed exchanges of nearly 30% is the result of the greater use of LMEs.

The proliferation of distressed exchanges may overstate the overall observed default rate. To that point, the 2024 rates (including distressed exchanges) for high yield and leveraged loans were 1.4% and 4.0%, respectively. Stripping out distressed exchanges, the 2024 default rate falls to 0.3% for high yield bonds and 1.5% for leveraged loans. While distressed exchanges are technical defaults since the terms of the debt agreement are altered, the recovery rates are more favorable for distressed exchange transactions relative to traditional defaults. Specifically, over the past 12 months, the recovery rates on distressed exchanges for high yield bonds and leveraged loans were 48.2% and 18.3% higher, respectively. Distressed exchanges, particularly LMEs, can grant a borrower the liquidity and flexibility needed to correct critical issues, and certain transactions are included in these default statistics even if there is no principal loss. At times, however, there are abusers of these transactions who are merely “kicking the can” on their debt as fundamental issues remain or increase.

Recent data points show that distressed exchanges can lead to better outcomes relative to outright defaults, but the long-term effect of their proliferation is not currently known. What is known is that, based on recent trends, the amount of distressed exchanges, and LMEs, are not going away any time soon.

3Q 2024 Market Insights

This video is a recording of a live webinar held October 23 by Marquette’s research team analyzing the third quarter of 2024 across the economy and various asset classes and themes we’ll be monitoring over the remainder of the year.

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

Sign up for research alerts to be invited to future webinars and notified when we publish new videos.

If you have any questions, please send our team an email.