Goldman Warns of Complacency as Global Spreads Hit 2007 Lows

Goldman Sachs Group Inc.’s credit strategists warned against complacency and urged clients to hedge after a measure of credit risk for global corporate bonds fell to the lowest level in 18 years.

“There are enough sources of downside risks to warrant keeping some hedges on in portfolios,” Goldman strategists led by Lotfi Karoui wrote in a note dated July 31, just before the White House announced a string of new tariffs. “Growth could surprise further to the downside,” dis-inflationary pressures could fade or renewed concerns over Fed independence may fuel a sharp selloff in long-dated yields.