Yifei Liu
Research Associate
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Fade Credit Concerns, Favor Quality: 10 Things We Are Thinking (Ahead Of Earnings Season)
Credit spreads have widened as bond risks intensified, pressuring weak-balance-sheet companies. But the stress is narrow and valuations have already compressed, so equity risks look manageable. Rather than de-risk, we would lean into quality: large over small caps, quality capex, and defensible Tech margins, and look to Q3 earnings for confirmation.
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US High Quality Strategy: Factors Worked, Benchmark Ran Faster
A narrow, tech-led rally left USHQ trailing its benchmark despite positive returns to the BCA Score. USHQ SMID lagged more modestly, with lower risk.
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The Fed-Hiking Trail Map: The Path Higher For Equities
The Fed’s first hike is unlikely to be an equity-market cliff. Recent multiple compression has absorbed some of the rate shock, while bond risk premia, rate volatility, and inflation expectations remain contained. Stocks have typically climbed through hiking cycles, but we favor moving up in quality through our long/short Quality Capex Basket.
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Technology, Defense, And A Copper Entry Point
In this screener report, we explore opportunities in duration-resilient large-cap Technology, emerging defense technology, and a conditional entry point into copper.
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Cerberus Paribus: The Three-Headed Threat To Equity Valuations (Bonds, Earnings, and IPOs)
We remain constructive on US equities, but higher yields, slower EPS growth and heavy IPO issuance remain significant risks to valuations, leaving the path to our year-end target increasingly dependent on earnings. Tactically, there has already been a significant, but benign, compression in multiples, as earnings have outpaced prices. A well-communicated Fed hike could ease rather than intensify bond-market uncertainty.
