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Bill Holter’s Commentary

Just a glimpse of what a real trade war would look like?io

Bill Holter’s Commentary

And once again, it’s all about credit…!

“This Is The End-Of-Cycle”: One Bank’s Credit Monitor Is Flashing Red
November 27, 2018

Back in April, when very few were concerned about the fate of the US credit market where credit spreads were approaching all time tights, Morgan Stanley asked what would turn out to be a prophetic question: “Is the credit cycle about to crack”, and taking a contrarian position, answered in the affirmative.

Seven months later, as part of its 2019 Credit Outlook, Morgan Stanley takes its dismal take of US credit one step further, and in a report from strategist Adam Richmond, writes that “the credit bear market, which likely began when IG spreads hit cycle tights in Feb 2018, has begun and will continue in 2019, with HY and then eventually loans underperforming, as headwinds shift from technicals to fundamentals.”

To frame the temporal context of its gloomy assessment, Morgan Stanley writes that just one year ago not a cloud was to be seen on the credit horizon as “2017 was the ‘Goldilocks’ year” as growth expectations were rising on the back of a synchronized global expansion, investors could look forward to the possibility of tax cuts, and monetary policy remained very accommodative, aided by low inflation.