Thursday, 19 October 2017 05:45

Junk Bond Traders are Buying Stocks Instead

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(New York)

If there ever were a dubious distinction for the current stock market, this might be it. Bloomberg is reporting that many junk bond traders have given up trading their core asset and are instead turning to buying equities. They are doing doing so because they see less risk and more upside in stocks. The best returning junk bond funds recently have been those boosting their allocation to equities, such as the Fidelity Capital & Income fund, showing how much stocks have helped the sector.

FINSUM: The big driver of these moves is that risky credit has rallied even more this year than stocks, making it look even riskier. However, if you take a step back, this just shows how overvalued the whole market is.

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