Will High Yields Crack the Market’s Resilience?

Headline market resilience to higher rates masks real stress in lower-quality credit and smaller stocks, favoring a quality bias.

• Rates aren't obviously wrong: Robust US/Europe/Asia growth plus above-target inflation and a non-inverted yield curve suggest current rate levels aren't restrictive.
• Surface calm, hidden stress: Despite near multi-decade-low credit spreads and double-digit stock gains, over half of the largest 3,000 US stocks have drawn down 20%+ since June.

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