Consensus Credit Risk Helps to Navigate “Risk Off” Markets

January 2022 has been a difficult month for investors: S&P500 down 7%, NASDAQ down nearly 12%, and most bond market returns are negative. Looming Fed rate hikes mean more “Risk Off” days.

But cash rates will take time to reach meaningful levels, so the hunt for yield continues.  Equity dividend yields are close to historic highs and many of them are significantly above their fixed income equivalents.  Consensus credit data can identify where high yields are underpinned by safe credit.

Figure 1 compares the equity dividend yield with average default probability for the main US Equity industries [please continue below to access full report].

Figure 1: US Equity Dividend Yields and Estimated Probability of Default, Dec 2021

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    Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.