Source: Morningstar as of 10/29/2018.1
The resilience of floating rate loans and short duration high yield amid heightened equity volatility is not unprecedented. On a historical basis, as shown in Figure 2, equities outperformed both bonds and loans during periods of low volatility. Over 180 months, as the month end VIX level increases, that performance dispersion decreases. When equity volatility was high enough, the S&P 500 underperformed both loans and short duration high yield bonds during those months.
In this most recent sell-off, equities may be experiencing more of a risk-off sentiment due to those growth fears which have not caused the same reaction in fixed income investors. By most credit metrics, the financial health of bond and loan issuers is stable and default rates remain below historical averages.
Click here to read more on Iris.