Her remarks followed a statement from the BlackRock Investment Institute that favored investment-grade credit over stocks.
“Our reasoning: valuations, strong balance sheets, low supply and moderate refinancing risks,” said the note from Wei Li, global chief investment strategist, and others on the team.
“We prefer investment grade credit over equities on a tactical horizon as we see a new market regime with higher volatility taking shape,” the BlackRock Investment Institute team said.
Institute researchers said, “First, yields on IG credit have risen, making for improved valuations and a larger cushion against defaults. Second, balance sheets are strong. … Third, supply is low, and we see only moderate refinancing risks. Our conclusion: We believe IG credit can weather a significant growth slowdown whereas equities don’t look priced for this risk.”
The unemployment rate and personal income continue to show “green and strong, pointing to an economy that is slowing but still showing some signs of strength,” but three of the five metrics on BlackRock’s recession monitor — lending standards, industrial production, and small-business optimism — are “flashing red,” according to Chaudhuri.
