The US High Yield (‘HY’) market has so far demonstrated resilience throughout the current period of recent market volatility. For the HY asset class, a low, positive GDP environment can potentially offer a constructive environment. Short duration approaches should offer a nice balance of potential outcomes.
It’s fair to say that we have seen a significant shift in market dynamics related to the US macro-outlook, instigated by tariff and general policy uncertainty which is affecting both business and consumer confidence. As a result of downwards revisions to growth, the market is now pricing that the Federal Reserve (Fed) will need to cut rates three times before year-end.
US equity markets have reflected these concerns with heightened day-to-day volatility as the headlines have evolved, as the chart below demonstrates. As of 20 March 2025, the S&P 500 is down 3.4% and the Russell 2000 down 7.0%. Meanwhile, the US Hield Yield market has been resilient so far, posting a +1.6% YTD return. The right-hand side of the chart shows how many negative days < -10bps that each of these indices has experienced YTD (along with subsequent tiers).
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