What JPM's Michele Expects for Credit Spreads, Defaults

The video discusses the implications of high yield and default risk in the context of a lack of credit. It highlights the effects of excess liquidity and quantitative tightening on the economy, predicting a recession and its impact on credit spreads. The discussion includes an analysis of default cycles and their influence on market behavior, emphasizing risk aversion and de-risking. Finally, it compares the attractiveness of public versus private credit, concluding that public credit is currently more appealing.

What is the expected impact of quantitative tightening on the financial system?

• Immediate economic growth

• Pain during a recession

• No significant impact

• Increased liquidity

During a recession, high yield credit spreads are expected to:

• Increase to a minimum of 800 over

• Disappear completely

• Decrease significantly

• Remain stable

What was unique about the 1995 economic scenario?

• It had the highest default rates

• It was a soft landing

• It was marked by a financial crisis

• It was a period of high inflation

What percentage of high yield investments remained 'money good' even during the worst cycles?

• 50%

• 70%

• 90%

• 100%

Which type of credit is considered more attractive currently?

• Public credit

• Private credit

• Neither is attractive

• Both are equally attractive