Why Defaults Aren’t Likely to Rock High Income’s Boat
by High Yield Team, Fixed Income, AllianceBernstein
Worried about rising defaults? Here are two good reasons not to be. First, even in 2009’s high-default environment, when the default rate topped 10%, US high yield delivered an astonishing 59% rate of return. Second, for 2018, we expect the high-yield default rate to rise to just 2.5%. That’s in line with the average over the past 10 years. So don’t add high defaults to your list of worries.
There is likely to be some volatility ahead, however, for income-oriented investors. We believe that the best approach for generating income in this kind of environment is a diversified, global multi-sector high-income strategy. Because while there are risks on the horizon, there are opportunities too.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.
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