Markets anticipate Federal Reserve rate cuts later in 2024 as recession fears fade and inflation is likely to moderate further. Strong financial position of investment grade issuers should spur demand for credit. Despite valuations looking less appealing than they once were, investors can still find pockets of value in the asset class, says Andrzej Skiba.
With the fear of recession firmly in the rearview mirror, investor focus shifted towards incoming inflation data. With US inflation moderating over the course of the recent months, markets are now expecting the Federal Reserve to cut interest rates in the latter half of this year.
While comparatively high level of interest rates may persist for longer and potentially trigger an economic slowdown, the underlying financial health of investment grade issuers, including those that are more growth sensitive, is expected to stay strong.