- Market value: A first-quarter selloff has improved value and offered more upside. In public credit the US outperformed Europe, while energy benefited but telecoms and broadcasting suffered.
- Economic outlook: With the war in Ukraine inflicting a stagflationary shock on the global economy, central banks risk being caught between a rock and a hard place.
- Financials: Higher inflation means higher interest rates, which are fundamentally positive for the financial sector. With this in mind, the current vintage of financials looks broadly attractive.
- Credit fundamentals: With margins and cashflow under pressure, deleveraging is likely to slow. This urges caution on fundamentals, but global default rates should stay relatively low this year.
- Leveraged loans: Despite recent developments, European leveraged loans were relatively robust in Q1 2022. Key indices outperformed high yield bonds in both Europe and North America.