Why BlackRock's Keenan Prefers Credit to Equities

The transcript discusses the current economic cycle, highlighting the transition from excess liquidity to inflation and the resulting market volatility. It examines the credit markets, noting their adjustment to new rate regimes and the improved health of the high yield index. The discussion also covers the lack of significant stress in the high yield market and the potential for future economic changes, including increased costs and lower free cash flow conversion. The overall outlook suggests that credit markets may offer attractive opportunities compared to equities in the coming years.

What is the primary reason for the current market volatility according to the transcript?

• Rising commodity prices

• Excess liquidity from the pandemic

• Political instability

• High unemployment rates

How are credit markets expected to perform in the near future?

• They will experience a significant increase in defaults.

• They will remain stable with low default rates.

• They will outperform equity markets.

• They will collapse due to high leverage.

What has been a significant change in financial behavior since the 2008 crisis?

• Increased leverage in companies

• More disciplined balance sheet management

• Decreased focus on credit quality

• Higher interest rates

What is a key factor that has improved the quality of the high yield index?

• Increased government intervention

• Higher leverage ratios

• Disciplined financial management

• Rising inflation rates

What is expected to happen to free cash flow conversion for companies in the coming years?

• It will increase significantly.

• It will remain the same.

• It will decrease due to rising costs.

• It will be unaffected by inflation.

How should equity markets adjust according to the transcript?

• By increasing leverage

• By maintaining current PE multiples

• By adjusting to lower growth levels

• By reducing risk premiums

What makes credit markets attractive relative to equity markets in the future?

• Attractive yields and income strategies

• Higher risk premiums

• Lower PE multiples

• Stable free cash flow conversion