HALISTER1: Post-Brexit Switch to Search for Yield Faster Than Expected: GS

Post-Brexit Switch to Search for Yield Faster Than Expected: GS

(Bloomberg) -- The velocity of the transition to “search for yield” from “search for safety” after Brexit surpassed expectations, Goldman strategists led by Charles Himmelberg wrote in note.
  • Brexit hastened the search for yield and bolstered the degree of risk tolerance pushing the marginal dollar to seek higher carry because of accommodation by central banks leading to low rates
  • Recommend overweight single-Bs, neutral CCCs and underweight BBs
  • CCCs upgraded to neutral from underweight; despite recent beta underperformance of CCCs, they still offer a strong yield pick-up relative to their own history
  • Also recommend overweight Energy vs Metals & Mining on the view that the lows for base metals are yet to materialize in this cycle, while WTI price forecast for 2H16 is $50/bbl vs the previous forecast of $45
  • Oil market has gone from “nearing storage saturation” to deficit earlier than expected
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Charles Himmelberg (Goldman Sachs Group Inc/The)

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