10 July 2023
US job growth is slowing and signs of trouble are emerging in rising costs and pressure on profit margins for blue-chip companies. Despite this, investors are not fully pricing in the risks. Over $500 billion of bonds near junk status are at risk of downgrades, potentially leading to difficulties in raising cash and an increase in defaults. Executives are becoming more conservative with cash usage, anticipating a downturn. Bankruptcy filings suggest the default cycle may have begun.