HYLS - Can A High-Yield Allocation Still Offset Equity Volatility?
By Gershon Distenfeld
Should you be concerned that high-yield bonds didn't predict last year's equity market selloff? We don't think so. In fact, we think investors should consider adding high-yield exposure to reduce overall risk.
High-yield bonds have traditionally been a reliable early indicator of market trouble. Over the past 20 years, high-yield credit spreads -the extra yield investors earn for holding these assets instead of safer government debt - widened before every big equity market selloff, including the 1998 Russian default, the bursting of the dot.com bubble and the global financial crisis.
But some