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Applied philosophy: Are US corporate investment grade spreads unusually tight?

23 June 2025
Andras Vig
András Vig
Multi-Asset Strategist
World connection concept

Welcome to Applied Philosophy, a regular piece on global equity markets from András Vig and the Global Market Strategy Office. In the piece, they take an in-depth look at a topic of economic or market significance, before assessing how its evolution could inform or impact their model asset allocation.  

  • Corporate investment grade bonds in the United States are not necessarily the most exciting assets at this moment, but perhaps that is just as well.
  • I generally view them as a defensive asset, thus I think that is a positive, not a negative.
  • Nevertheless, despite some concerns over US economic growth, spreads have remained tight. Should investors be worried about that?

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FAQs

Asset allocation is the process of dividing an investment portfolio among different asset classes, such as stocks, bonds and cash and so on. Bonds generally tend to be ‘safer’ investments than stocks and are, for example, seen as more defensive. Assets are allocated based on economic and monetary expectations.  

Model portfolios are a diversified group of assets. They are designed to achieve an expected return with the corresponding risk. Model portfolios are usually extensively researched and, in most cases, have a combination of managed investments.

Spreading the risk and number of potential opportunities across various asset classes, such as equities, fixed income, and commodities. The aim of diversification is to reduce the overall risk of the portfolio.

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