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Corporate Credit Should Outperform Equities

Published 07/12/2012, 10:00 AM
Updated 07/09/2023, 06:31 AM

U.S. equities have outperformed (albeit at much higher volatility) U.S. corporate credit this year -- both HY and IG.
S&P500 vs. HY And IG Liquid Indices
But is this outperformance consistent with the current economic environment in the U.S.? Here is how the asset classes have performed during different ranges of GDP growth from 1980 to today.
Return Relative To Real GDP
Since we are likely to be in the middle bucket for 2012, credit should, again, outperform equities. If we make this comparison using nonfarm payroll's monthly changes, we get a similar result.
Return Relative To Nonfarm Payrolls
Either we are going to return to first-quarter like job growth in the U.S. later this year, which seems unlikely, or equities look expensive relative to credit.
Monthly Nonfarm Payrolls

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