Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 50
THE DRUMMER'S EAR | RHYTHMIC REASONING
As it stands right now, current equity valuations and credit spreads
leave limited appetite for us to increase exposure to the riskier
segments of the market. With forward price-to-earnings multiples
already elevated and credit spreads below historical norms, the
potential for further near-term multiple expansion or spread
compression appears limited.
Fig. 7: There are opportunities in high yield across
certain rating tiers, as CCCs drive the bulk of defaults
60%
45%
30%
15%
0%
1981
1988
1995
2002
BB
B
2009
2016
2023
For us to turn more constructive on risk assets, we would need
to see valuations gravitate to more appealing levels – whether
though lower equity multiples or wider credit spreads – that better
reflect the underlying macroeconomic and policy risks. Until then,
we remain comfortable with a conservative approach, emphasizing
quality, diversification, and discipline in portfolio construction.
CCC/C
Source: S&P Global, Scotia Wealth Management
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