Two Risks, Two Views

- Long double-dip risk — "in August, markets responded negatively to the slide in the US data. Yet our economists continue to believe that double dip concerns are overstated. And, even if they do come to fruition, we believe corporates in core Europe are relatively well equipped to handle the downside. So we retain a moderate long overall."
- Short periphery credit risk — "although sovereign spreads were under pressure in August, we did not see the same divergence in core vs. periphery corporate spreads as earlier this year. Our work on past sovereign crises suggests this could be temporary. We’d be short periphery credits, especially the banks."
- Don’t chase the real junk — "rock bottom spreads analysis suggests credit is least well protected against another economic downturn at the bottom end of the credit quality curve. We favour being slightly more conservative, and holding double- and triple-Bs rather than triple-Cs."


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