Don’t buy this dip

Things might not get better…

It’s been the most difficult year and, having held on so well for so long, the credit market effectively capitulated in the final quarter. Spread widening accelerated, primary ground to a halt – we believe prematurely –  and total returns gapped lower through a difficult November and December as performance dropped sharply. 2018 is just about the worst recorded for credit since the 2008 crisis year. It looks bad (and it is), but there ought not to have been the sense of crisis for the asset class. Fear just seemed to creep in as equities tumbled and rates rallied, which then saw single names afflicted by any negative news flow gap wider in an unforgiving name specific sell-off. New deals thus needed to offer significant premiums to get away, secondary repricing was brutal leaving us to fear the next primary offering.

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