Goldman Sachs The Markets The biggest opportunities in US credit markets
Oct 11, 2024
Lotfi Karoui, Chief Credit Strategist at Goldman Sachs Research, shares valuable insights into the evolving credit markets. He highlights that now could be a prime time to invest in lower-rated debt, particularly in triple Cs and agency mortgages. The discussion reveals a manageable rise in bankruptcies linked to small issuers and notes market stability. Lotfi also emphasizes the significance of monitoring labor market indicators and how credit can act as a hedge against equity market volatility, especially in light of the Federal Reserve's path.
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Fed Rate Cuts
- The market expects the Fed to cut rates by 150 basis points by mid-June 2024.
- This expectation seems reasonable given the current economic conditions.
Invest in Lower-Rated Debt
- Now is a good time to consider lower-rated debt, particularly those with strong business models and weaker balance sheets.
- Focus on the Technology, Media, and Telecom (TMT) sector for such opportunities.
Agency Mortgages
- The upcoming cutting cycle should reduce rate volatility, benefiting agency mortgages.
- Agency mortgages currently offer attractive premiums compared to treasuries.