Changes in stock and high-yield bond valuation levels have diverged since the start of September, a shift after largely tracking each other since the beginning of 2020. Stocks reached a peak in early September and have since returned four straight weeks of decline through the end of last week.
Although yields are starting to creep up, which would bring down valuations, high-yield bonds have held up so far. Should the stock market continue to struggle, it is possible that valuation levels in the high-yield bond market would be due for some adjustment. We would expect movements in the two markets to converge as they continue to be driven by similar concerns in the near term.
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