Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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OP 2019: Corporate credit crunch pushes Netflix into GE’s vortex
Peter Garnry
Chief Investment Strategist
Summary: The once all-powerful General Electric is foiled by the magnitude of its liabilities and the contagion ripples through the markets, bringing content king Netflix to its knees.
For the full list of Saxo's 2019 Outrageous Predictions, click here.
2019 proves the year of credit dominos toppling in the US corporate bond market.
It starts with General Electric losing further credibility in credit markets, pushing
the credit default price above 600 basis points as investors panic over GE’s $100
billion in liabilities rolling over in the coming years at the same time as the firm sees
deteriorating cash flow generation.
GE loses its ability to contain the damage and files for Chapter 11 and restructuring,
selling off assets and consigning the once-glorious industrial giant to the dustbin of
history.
The event sends shockwaves through global credit markets as investors realise that
the Powell Fed has already tightened financial conditions beyond the market’s ability
to bear. Credit spreads over the Treasury curve widen rapidly, painfully lifting funding
costs for US companies. The carnage even spreads as far as Netflix where investors
suddenly fret about the firm’s fearsome leverage, with a net deb t to EBIDTA after
CAPEX ratio of 3.4 and over $10bn in debt on the balance sheet.
Netflix’s funding costs double, slamming the brakes on content growth and gutting the
share price. To make things worse, Disney’s 2019 entrance into the video streaming
industry trims Netflix growth further still.
The negative chain reaction in corporate bonds sets off massive uncertainty in high-yield bonds leading t o a Black Tuesday for
exchange-traded funds tracking the US high-yield bond market where ETF market
makers are unable to set meaningful spreads, forcing a complete withdrawal from the
market during a tumultuous trading session.
The fallout in the ETF market becomes the first warning shot of passive investment
vehicles and their negative impact on markets during turmoil.
Quarterly Outlook
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Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
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Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...