Van Hesser's 3 Things in Credit - A KBRA Podcast

In this week's episode, KBRA Chief Strategist Van Hesser discusses: Big bank earnings. All of the attention was directed at expense growth, which ignores a remarkable development that is far more important to creditors. Recession risk. It’s back on our radar, and history tells us it needs to be on yours. The energy transition. Spiking oil prices are one sign that this is not likely to be a smooth...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: Turning inward. The world’s two economic superpowers, the U.S. and China, have their respective plates full of domestic issues that threaten to slow global growth. Wide margins. Corporate pricing power, which is contributing to the highest inflation in 40 years, has boosted margins. The credit cycle. Some say we’re mid-cycle and o...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Risks. There is no shortage of things on this list, but we’ll highlight the ones that we are paying close attention to. 2. The jobs report. Our focal point remains more on growth in the labor force and less on the unemployment rate. 3. Supply chains are broken and driving the inflation narrative, right? The latest data shows th...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: Linear thinkers. The crowd that believes the recovery will be a straight line based on past experience runs the risk of pushing the Fed into a recession-producing policy error. We’ll explain. Geopolitical hot spots. As the Biden administration focuses internally on navigating America’s toxic politics, the likelihood of flare-ups i...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The leveraged loan market saw deals pulled this week, prompting some market heavyweights to wonder if this is the start of something bigger. We’ll weigh in. 2. China has become a remarkably fluid story influencing credit markets. Here’s what to watch in 2022. 3. Small to midsize business indicators are flashing yellow. Don’t lo...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Omicron. We’ve sifted through all the noise to come up with useful perspective to creditors. 2. Nordstrom’s big earnings miss. What’s the correlation to the retailing sector? 3. One measure of investor sentiment has swung wildly in the past week. We’ll walk you through the equities-versus-credit story.

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The fading away of COVID, at least in terms of its ability to disrupt. New developments on the therapeutic front might just make that statement true. 2. Retailers had a really strong week. Is the retail apocalypse over? 3. Raging inflation means margin pressure, right? Not so fast—we’ll check Q3 earnings to see where we stand.

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Inflation. It’s back, but will it stay? Here is some much-needed perspective. 2. General Electric’s cautionary tale. Did investors overweight the benefits of diversification? 3. The Fed’s semiannual report on risks to the financial system is out, and it’s fairly benign. Should we be worried?

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The spike in home values. We remain comfortable with the risks to markets and the broader economy, and there are opportunities emerging in what could be a housing “super-cycle.” 2. Where did all of the savings go? Apparently, it’s been spent, taking away one oft-discussed engine of future spending growth. 3. Government bond mar...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Uncertainty reigns. The common thread running through our recent webinar was one of uncertainty—something underweighted in credit markets today. 2. General Electric (GE) is making progress in its restructuring, and its commitment to deleveraging is sensible. But a challenging environment is not making GE’s transition an easy on...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Thematic investing seems to be trumping fundamentals in credit. That doesn’t sound like an investing strategy—but in this market, with this level of exogenous influence, it might make sense. 2. Big bank earnings once again reassured markets that all is not only well, but extraordinarily so. We canvas the conference calls for in...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The rise in energy prices is spooking politicians and investors. What does it mean for credit? We’ll set the context. 2. As we enter Q3 earnings season, all eyes are on corporate margins. Powering through the multitude of headwinds is a tall order. 3. Europe’s political winds are shifting in ways that are reducing euro area cre...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The jobs market is tight, but not strong, and on Jobs Friday it’s important not to equate the two. We’ll explain. 2. Some investors believe corporate credit risk has been structurally improved. We’ll examine the argument. 3. Where did all the growth go? Economic growth forecasts for Q3 have plummeted. Does that come as a surpri...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. With the reality of the Great Deceleration settling in, we canvas Wall Street to see what risks could turn market sentiment. 2. Economic growth is being cut in half, but corporate earnings are expected to grow at double-digit rates? We’ll take the under. 3. Consumer ABS performance offers great insight into the health of the U....

In this week's episode, KBRA Chief Strategist Van Hesser discusses: Evergrande—no, this is not China’s Lehman moment, but it does speak to what is happening with the world’s second-largest economy, and that’s important to credit investors. We’ll elaborate. Stretched valuations—just how worrisome are they? We think it’s debatable, and we’ll lay out our case. The Fed speaks! While the world is focus...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Gap’s sensible liability and cash management through the COVID period has put it on a more creditworthy path. 2. A historic percentage of Americans believe the country is in bad shape. How does that square with buoyant financial markets? 3. Fading inflation—this was a good week for those in the transitory camp and that’s good f...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Here comes what could be a 10% hit to corporate earnings—it’s higher taxes, if Biden gets his way. 2. Credit deterioration in the “buy now, pay later” space could be a canary in the coal mine for consumer lenders. We’ll explain. 3. The delta variant is causing travel to fall off once again. But don’t think the travel, leisure,...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: CLOs are now a $1 trillion market (and growing). A report out of the New York Fed points to a healthy maturation of its investor base. We’ll elaborate. Afghanistan. Markets have looked past this story until now. We feel a gravitational pull toward safer assets. Capex, expected to rise materially in 2021, has come in a bit soft lat...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: Squaring up deteriorating economic growth with stretched valuations. China’s fluid policy-driven initiatives are creating a headwind for the global economy. In search of “TINA Turners.” No, not that Tina Turner. We’re looking for things that will change the course of TINA investing, as in There Is No Alternative.

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The housing market is moving from superhot to warm. It’s a good proxy for what’s ahead for the broader economy. 2. Small business optimism has taken a turn for the worse. We’ll explore what’s behind it, and why this matters. 3. The Democrats’ plan to tie Biden’s $3.5 trillion “human infrastructure” bill to the $1 trillion tradi...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. In search of economic normality. We know this isn’t it, but it’s coming. 2. The Fed is guiding its path toward tightening seemingly every day. Our thoughts around what happens to credit, when it gets there. 3. Corporate earnings are forecast to continue to grow off of today’s stimulus-fueled results. We would be a bit more caut...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The UK vs. COVID—Its spike in new cases, and subsequent fall, could serve as a harbinger of what’s to come in the U.S. But there is an important difference between the two countries. You’ll want to stay on top of this story. 2. The upcoming July jobs report might be the most inconsequential one of the pandemic era. We’ll tell y...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The spread of the delta variant is keeping the pandemic on the radar of investors, and contrary to some, we believe it is impacting economic behavior. 2. A number of useful proxies for economic growth have rolled over. It’s worth considering as you think through the second half. 3. The Fed says the real unemployment rate is 8.7...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. Margin pressure. The Producer Price Index confirmed this week what we all know—strong demand and supply chain bottlenecks are causing price pressure that figures to hit corporate margins. We think this is largely a story shareholders have to worry about. 2. ESG favorable bonds are on track to cross $1 trillion this year. The mo...

In this week's episode, KBRA Chief Strategist Van Hesser discusses: 1. The rally in rates. It seems to have caught just about everyone off guard. We’ll explore what it means for credit markets. 2. The pandemic has not gone away. The most lethal side of it has been contained for now, but it still is likely to act as a drag on the global economy. 3. Where did all the defaults go? We’ll take stock of...