Is there any juice left in IG credit spreads?

Joseph Kalish at Ned Davis Research has recently reiterated his market weight view on corporate credit, but says the almost relentless up move since the March lows has left him wondering whether he should upgrade again to overweight. He has therefore taken a broader look at the indicators, what they are currently saying, and what might cause him to change his position. On an absolute basis, the picture is mixed, according to Kalish. He believes there’s not much value left in investment grade, whereas high yield has better value but more risk, as credit fundamentals and pricing power remain weak. That said, Federal Reserve support, strong inflows, high cash levels, and improved risk appetite limit the downside, says Kalish. Reflecting these divergent trends the technical picture is mixed, he says, with the continued outperformance of high yield relative to Treasuries and broader US aggregates supporting a potential credit overweight, while a high yield overweight needs a better CCC performance and for high yield to outperform investment grade.