The exuberance in U.S. corporate bonds follows that in stocks but is likely to end soon, according to Gluskin Sheff chief economist and strategist David Rosenberg.
Investing in the asset class isn’t being driven by economic growth but by the ongoing drive for yield.
The “dividend aristocrat” theme of investing in companies that have been raising their dividends for the last 25 years is alive and well. Investors are starved for higher yields in a still ultra-low interest rate environment, and U.S. corporate bonds are benefiting.
“You have a very expensive stock market so it stands to reason that you have a very expensive corporate bond market. The two are basically correlated assets,” Rosenberg said in a phone interview.
“I’m worried about the valuations of both asset classes, frankly speaking,” Rosenberg added.
In baseball parlance, Rosenberg said the U.S. economic cycle is somewhere in between the seventh-inning stretch and the top of the ninth. Now is the time to focus on high-quality companies with good liquidity in non-cyclical industries.
US Corporate Bonds Hitting a Peak?
Like stocks, corporate debt valuations worrying, says strategist Rosenberg
The exuberance in U.S. corporate bonds follows that in stocks but is likely to end soon.
A trader works at his post on the floor of the New York Stock Exchange in this file photo. A reduction in risk-taking in the high-yield bond market signals that investors are starting to take a more defensive posture. Richard Drew, File/(AP Photo
Rahul Vaidyanath
Journalist
|Updated:
It's not supposed to be this easy.
, chief economist and strategist, Gluskin Sheff & Associates
Rahul Vaidyanath
Journalist
Rahul Vaidyanath is a journalist with The Epoch Times in Ottawa. His areas of expertise include the economy, financial markets, China, and national defence and security. He has worked for the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York, and Los Angeles.
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