Tight Credit Spreads Limit Upside as Investors Weigh 2026 Prospects

This commentary highlights the implications of unusually tight high-yield spreads for forward returns. 

• High-yield spreads sit near historical lows at roughly 3%, offering steady carry but leaving little room for further compression and increasing the probability of widening.

• Historical periods with sub-3% spreads delivered modest one-month gains for HY, while equities showed a wider dispersion of outcomes and notably stronger upside potential.

• With 2026 expected to bring above-trend growth, equities may offer more attractive risk-reward than credit, though HY remains valuable for income and diversification.

Review the full commentary to assess how tight-spread environments should influence portfolio positioning.