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Friday 13 September 2019
The high yield market this year has benefited from lower interest rates, but also faced headwinds from fears of an intensifying trade war and its potential impact on global growth. While we remain confident that strong US consumer demand will keep US growth on a positive trajectory through year end, trade issues are beginning to have an impact on business confidence and, therefore, business spending. Growth is already slowing in Europe, as evidenced by the 2Q19 modest decline in German GDP. Although we expect emerging markets (EM) to find lower US interest rates beneficial, EM economies are highly export-oriented and will face headwinds from trade wars.
When we consider the outlook for global high yield, it is important to remember US HY remains the largest component of the global high yield market, at 60%, while Euro High Yield and Emerging Markets Corporate High Yield are about 18% and 22%, respectively. We make the following observations about the state of the Global High Yield market:
Considering our observations surrounding today’s high yield investment climate, our outlook and some insights on our positioning is below:
Trade tensions have led to slower economic growth and lower interest rates. We expect trade turbulence to continue and we expect this turbulence to generate challenges and opportunities. Global High Yield has a very broad opportunity set compared to its regional components and we expect to see solid opportunities to generate relative performance as macro headwinds create opportunities to pivot between regions. We continue to believe that, even with slower growth due to trade tensions, high yield will continue to be an important part of a broadly diversified portfolio.
Unless otherwise stated, all information contained in this document is from Amundi Pioneer Asset Management (“Amundi Pioneer”) and is as of August 31, 2019.
The views expressed regarding market and economic trends are those of the authors and not necessarily Amundi Pioneer, and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading on behalf of any Amundi Pioneer product. There is no guarantee that market forecasts discussed will be realized or that these trends will continue. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested.
This material does not constitute an offer to buy or a solicitation to sell any units of any investment fund or any service.
Date of First Use: September 12, 2019
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