Guggenheim CIO Says Credit Market Is ‘Next Shoe to Drop’

2023-08-10 - Scroll down for original article

Company: Guggenheim Partners Investment Management


Guggenheim Partners Investment Management is a global investment and advisory firm with more than $225 billion in assets under management. The firm provides a broad range of investment strategies and advisory solutions to meet the needs of a diverse clientele, including institutions, governments, corporations, endowments, foundations, and individuals.

Article Analysis

The article discusses the defensive stance of Anne Walsh, the chief investment officer of Guggenheim Partners Investment Management. Walsh expresses concern over the credit market, particularly lower-quality borrowers, in light of a potential higher-for-longer Federal Reserve and rising downgrades, defaults, and bankruptcies. She believes that the market is not fully pricing in these risks. However, she sees investment-grade bonds yielding over 5.5% as attractive and expects them to weather the cycle well. Walsh also favors US government bonds as they offer stability and the opportunity to invest in lower-rated credit if spreads become more attractive.

Market Reaction

Historically, market reactions to similar news have been mixed. While some investors may interpret Walsh's defensive stance as a bearish signal, prompting a sell-off in riskier assets, others may see it as a prudent strategy in a potentially volatile market, leading to increased demand for safer assets like high-quality bonds and government securities.

Investor Sentiment

Investor sentiment towards Guggenheim Partners Investment Management may be influenced by Walsh's cautious outlook. Investors may appreciate her conservative approach in a potentially challenging market environment, which could bolster confidence in the firm's risk management capabilities. However, some investors may be concerned about the potential for lower returns if the firm's defensive strategy limits exposure to higher-yielding assets.

Competitor Comparison

Compared to its competitors, Guggenheim Partners Investment Management's defensive strategy could be seen as more conservative. If the market remains stable or improves, competitors with a more aggressive strategy may outperform. However, if Walsh's concerns materialize, Guggenheim's approach could prove advantageous.

Risk Factors

The main risk factor highlighted in the article is the potential for a downturn in the credit market, particularly among lower-quality borrowers. If this occurs, it could negatively impact the firm's performance, particularly if it has significant exposure to these borrowers. However, Walsh's comments suggest that the firm is taking steps to mitigate this risk.


In conclusion, the news article suggests that Guggenheim Partners Investment Management is adopting a defensive strategy in anticipation of potential market volatility. This could impact the firm's stock price in the short term, particularly if investor sentiment shifts towards riskier assets. However, in the long term, the firm's conservative approach could provide stability and downside protection, which may be beneficial if the market becomes more volatile.


This financial report is for informational purposes only and does not constitute financial advice. Investors are advised to conduct their own research and consult with a financial professional before making any investment decisions.

Original Article:

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(Bloomberg) -- While calls for a soft-landing are piling up on Wall Street, Anne Walsh is staying on the defensive. Most Read from Bloomberg The chief investment officer of Guggenheim Partners Investment Management, which manages more than $225 billion, is hiding out in high quality bonds while bracing for lower quality parts of the credit market to get hit. “I don’t think the market is really pricing in the next shoe to drop, and that’s credit,” she said on Bloomberg Television. “Recession seems to be off everybody’s mind, but I think that’s probably a mistake at this point in time.” Walsh sees lower-quality borrowers at risk with the prospect of a higher-for-longer Federal Reserve and rising downgrades, defaults and bankruptcies. Higher quality credit is less of a concern. Yields over 5.5% on investment grade bonds are “attractive,” and the spread widening that happens in recessions is not likely to have a big impact on that space, she explained. “For those borrowers and credit takers who have cash and have the wherewithal for repayment right now, they’re going to come through the cycle pretty well,” she said. “The problem is the weaker credits, those that don’t have a lot of cash sitting on the sidelines,” Walsh said. “They’re not able to offset these higher costs of capital with reinvestment in cash instruments.” Walsh also likes US government bonds, as yields have remained in a relatively stable trading range and offer investors the opportunity to wait on the sidelines, investing in lower rated credit in the future if spreads get more attractive. “I think it’s a really good time to be defensive and thoughtful and wait for the next opportunity set,” said the CIO. Story continues Walsh expects the US recession to be a “rolling one,” where different parts of the economy are hit and other, stronger capitalized parts are spared. She also highlighted that the market hasn’t yet reacted to the commercial real estate cycle, where the cost of leverage is still high for borrowers and some tenants are vulnerable. “If you are a small developer who owns a handful of small office buildings in a suburban location, and you’re now paying 6% for your debt, and all of a sudden your tenants are starting to walk out the door, now you’ve got a problem,” Walsh said in a separate interview. She will be closely assessing the health of consumer spending over the next several months to determine the extent of policy tightening working its way through the economy. She also said that while Thursday’s CPI print means the Federal Reserve is done hiking interest rates, the central bank is still tightening through shrinking its balance sheet. “I think we’re done with the hikes right now, but then there’s QT still going on,” said Walsh. “Don’t ignore that.” --With assistance from Alix Steel. Most Read from Bloomberg Businessweek ©2023 Bloomberg L.P.