Mark Kiesel: So we're going through something truly unprecedented in terms of the sudden stop in the global economy. One of the sharpest contractions we'll see since World War II. The positive news is that we've really had something truly unprecedented in terms of the policy response. The Fed has expanded its balance sheet 10% of GDP in two months. I think what we saw in March was a market that was significantly over sold. It was one of the worst markets I had seen in 12 years. So high quality credit got extremely cheap. The valuations got attractive. The bottom line is that the US market looks the most attractive of all the markets in publicly traded credit right now. The investment grade market has that backstop. If you look at the hedged deals, if you look at people in Japan or people in Asia hedging the currency risk back, or if you look at Europeans, buying US credit and hedging the currency risk back. The outright yields after foreign hedging costs are as high as they've been in four years. We’re being selective in terms of favoring things like utilities, telecom, cable, cell towers, healthcare, pharmaceuticals, technology companies. We want to buy companies where the underlying credit fundamentals are stable to improving and the companies that can handle a second wave or a disappointment, a setback. The areas that we're most cautious on remain autos, energy, retail, chemicals. In terms of lower-quality credit, we're still a little bit cautious on high yield. We think that basically you're going to get high single-digit, potentially even low double-digit defaults. So big picture, we want to favor developed markets over emerging in general. We want to favor more investment grade exposure versus high yield and bank loans.
I think over the next six to 12 months, really, it's going to be whether we get a second wave and then the vaccine. And then how engaged will policymakers be, in terms of supporting the market? Will monetary and fiscal continue to bridge that shutdown risk, which it looks like in the US they're doing. But that can change also. So, I think we have to be alert to that risk.
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