The coronavirus outbreak or another economic shock could pop the bubble in the credit market, Scott Minerd said.
Guggenheim Partners Global CIO Scott Minerd said low yields in credit markets are disconnected from economic reality.
Scott Minerd, Global Chief Investment Officer at Guggenheim Partner, at the 2020 World Economic Forum in Davos, Switzerland on Jan. 21st, 2020.Guggenheim Partners Global CIO Scott Minerd said in a letter to clients that the elevated prices in financial markets show a "cognitive dissonance" from economic reality that has created a dangerous bubble among debt assets.
The U.S. stock market has shrugged off the initial sell-off that occurred as the outbreak gained steam, and bond yields continue to. Minerd pointed to low yields for bonds rated BBB or lower and oversubscribed sales of new bonds as examples of a credit market that is overly bullish. Since then, however, the coronavirus outbreak has grown significantly, leading to travel restrictions and temporary factory closures in China and companies around the world warning that the outbreak would hurt them in the coming year. There are now more than" on Thursday that some investors are underestimating the impact that the outbreak will have on the Chinese economy.
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