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As the coronavirus causes economic damage around the world, certain stocks are looking safer and more attractive than securities of most major countries, Credit Suisse says.
Typically government bonds are a safe haven for investors; however, the deadly coronavirus has caused unprecedented financial instability, causing governments to rapidly spend, spurring easy monetary policy that leaves interest rates histrionically low.
"The rise in government debt threatens to start to lead to government bond downgrades," Credit Suisse research analyst Andrew Garthwaite told clients.The firm said government bonds have "become a structural underweight," as a "non-diversifying returnless risk."
Credit Suisse screened for what it calls "new gold standard" stocks. These are companies with creditworthiness that compares to the average G7 government bond with regard to credit ratings and credit-default swap spreads. All of the listed stocks have dividend yields higher than the sovereign bond yields and an outperform or neutral rating from Credit Suisse.
"The credit ratings of many of the growth areas make them in effect potentially the new gold standard," said Garthwaite.
Credit ratings of "AA" or better are generally considered strong ratings. A company with a strong credit rating would be considered a good candidate for a loan, and these companies get to borrow at a lower interest rate. A CDS, or credit-default swap, allows investors to offset their default risk by trading the investment. The spread is the price of the swap in basis points.
Take a look at the "new gold standard stocks" from Credit Suisse.
