Equities have rallied, inflation is falling in the month of July, and global gas prices seem to be easing; investors can shake off the volatility concerns, right? Not just yet. Volatility experts Paul Britton founder of Capstone Investment Advisors told the FT that we aren’t through the weeds just yet as the corporate debt crisis looms at the end of 2022. Britton says there is a significant repricing as companies might struggle to pay off high corporate debt with rising interest rates. Capstone looks to profit on increasing volatility as they are a considerable hedge fund, but the VIX is still falling below its long-run moving average for the first time in four months. Fed experts like Mary Daly, president of the SF Fed branch, say the inflation battle hasn’t been won yet, signaling more rate hikes may be needed to bury inflation.
Finsum: Failing to consider the fact that inflation favors borrowers, real borrowing costs on corporate debt have decreased considerably.