Think

Market: Both BDC common stocks and publicly traded unsecured debt have been in rally mode for three weeks now.  For this preview of the week ahead, we will be looking out for any faltering in the blistering pace of the rebound in leveraged debt values. From the lowest point on Christmas Eve to the close on Friday BDC common stocks have moved up 11%. Less spectacularly, BDC Fixed Income has crossed back over par – using the median of the 41 issues we track – from a low of $24.30 in December, when nearly every issue out there had dropped below the $25.00 level. We’ll be focused on whether BDC common stock prices can make their way back – at least – to the late November level before the markets got into full dramatic mode as investors sold everything that was not nailed down, and some that was. Investors climbing that wall of worry have more than the usual number of challenges ahead including the well worn list of the government shutdown; the uncertainty over tariffs; concerns about a slowing economic environment – or worse; and the endless debate about what the Fed will or won’t do. Moreover, having climbed so high and so quickly investors have – metaphorically speaking – that much further to fall. The week ahead will be a useful test of the breadth and thrust of this rally. We take nothing for granted, and assume the next direction could just as easily be down or up. The best BDC investors might hope for in the short run is a modest pause two weeks ahead of earnings season.