Goldman Sachs: Global credit spreads have narrowed to their lowest level since 2007, suggesting to be prepared for hedging.

On August 1, Jin10 reported that Goldman Sachs credit strategists recently issued a warning to clients, advising them to hedge risks. The strategy team pointed out: “The recent series of trade agreements between the U.S. and its trading partners has clarified the tariff outlook, and investors are willing to overlook the short-term weakness in economic growth as long as the risk of recession remains manageable.” However, they also cautioned against complacency. On Thursday, the credit spread of global investment-grade corporate bonds narrowed to 79 basis points, the lowest level since July 2007, just before the outbreak of the global financial crisis. Despite the ongoing narrowing of credit spreads and the S&P 500 index hitting a new all-time high this week, the Fed has not signaled an imminent rate cut, indicating that it still requires more data to confirm that inflation risks will not persist. Goldman Sachs strategists emphasized: “There remain sufficient downside risks at present, making it worthwhile for investors to retain some hedging measures in their portfolios. Economic growth may fall further below expectations, anti-inflation pressures may weaken, or concerns regarding the Fed’s independence may be reignited, all of which could trigger a big dump in long bond yields.”