Michael A. Gayed: Credit spreads typically peak months after a recession begins

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25 min ago

Michael A. Gayed: Credit spreads typically peak months after a recession begins — Credit spreads lag recession onset

Credit spreads have historically reached their peak 5 to 7 months after a recession has begun, rather than before, according to Michael A. Gayed. He added that by the time widening appears in the data, it is often too late to reposition portfolios.

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Gayed previously reported that the S&P 500 fell 19.35% and high yield bonds declined 5.9% in Q4 2018, while the JOJO.Index hypothetical backtest gained 4.78% during the same period (link). He also noted that high yield option-adjusted spreads stood at 343 basis points in early November, marking an increase of 83 basis points from the 12-month low but remaining below the 10-year average of 383 basis points (link). These observations provide historical context to his views on credit spread behavior around recessions.

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