Goldman Notices Credit / Equity Relative Value Divergence

As markets continue to behave in odd and historically significant fashions, Goldman Sachs sees a relative value opportunity. In a “Portfolio Manager Action Alert,” the investment banks sees a mean divergence between bonds and equities. Such situations have a historical backdrop, the April 10 report notes, as it advises clients to look at statistical norms to recognize the trade opportunity.

Credit diverges from equities, Goldman option researchers note

On a risk adjusted basis, lower volatility credit investments have “significantly outperformed” stock-based assets. For instance, investment grade credit, measured by the CDX IG Five Year index, has surged ahead of their stock benchmark, GSCBIG equity OTR. Likewise, a similar relative value divergence...