1. Global Economic Backdrop Supports Credit Markets

We expect above-trend GDP growth in the US for the remainder of 2024 and near-trend growth next year. The labor market may soften further but stabilize throughout next year, as we expect layoffs to remain low. Inflation is likely to ease toward the Fed target of 2% by mid-2025, though it may tick up later due to base effects. Growth outside of the US is still expanding but signs of divergence are appearing. Global services remain in expansionary territory while manufacturing has been contracting and countries or regions, like the eurozone, with strong exposure to global trade may experience softer growth going forward. Risks to growth have increased but we expect central banks to mitigate these by moving rates from restrictive to neutral levels. As growth dispersion across regions may increase, we believe that investors could potentially benefit from tapping into the global investment universe, gaining exposure to different economies.

2. All-in Yields Remain Compelling

All-in yields remain historically elevated despite spreads grinding tighter. The current yield-to-worst of 4.67% for the Bloomberg Global Aggregate Corporate Index (as at 31st October 2024) is in the 69th percentile, which means that nearly 70% of the monthly yield observations since January 2001 have been below the current level.

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