Is the next 30% correction lurking just around the corner?
High valuations + low volatility = higher risk
Right now, investors seem complacent. Low volatility is lulling them into a false sense of security, even as high-yield bond spreads hover near multi-decade tights despite higher borrowing costs. History is clear: the last two times spreads fell into the 10th percentile, high-yield bonds dropped nearly 15% in 2022 and almost 35% in 2008.
There are no coincidences
These aren’t coincidences. They’re caution lights... and they’re flashing red again.
Recently, former Goldman Sachs CEO Lloyd Blankfein warned that credit markets top his list of concerns. He pointed to excessive leverage, especially in private credit, and historically narrow credit spreads.
Why it matters
If spreads rewiden sharply, history shows how painful the aftermath can be. Investors who ignore this history risk riding over a cliff with no brakes. Are investors sleepwalking into the next credit crisis?
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