LIVE MARKETS-Credit says worry like it's 2005 (when not much happened)

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CREDIT SAYS WORRY LIKE ITS 2005 (WHEN NOT MUCH HAPPENED)

Investors' main question in this uneasy market calm is whether tariffs point to a global recession, or whether, medium term, we all muddle through.

The honest answer is it's too soon to know, but analysts are now taking a look at other asset classes in the hope that they may offer clues that their day job don't.

Societe Generale's chief FX strategist Kit Juckes has been looking at credit spreads and notes that European high-yield and U.S. investment-grade credit indices are, very roughly, seeing the same amount of risk from the current crisis as they did from events in 2005.

By this he means a General Motors GM.N profit warning and the discovery of accounting irregularities at insurance firm AIG triggering temporary concern.

If that is the level of market fear we're talking about, then Juckes says "insouciance about the threat from President Trump’s policies ... is dollar-friendly, at least relative to other G10 currencies."

However, he's generally in the camp that there is something to worry about, even if it takes a while to play out, and sees a slow threat to the dollar "as global investors rethink both FX hedging strategies and total exposure to the U.S. market."

"Overall, I will be very surprised if we get through President Trump’s second term with nothing more dramatic than a 2005-sized wobble."

(Alun John)

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