NewEdge Wealth CIO Cameron Dawson Talks Market Choppiness

Cameron Dawson · NewEdge Wealth

Credit spreads widening and cost of capital rising; not yet acute stress, but distress risk rising.

Triple-C credit spreads have widened extraordinarily year to date and are nearly at 1,000 basis points. That widening is spreading into high yield, which is still around 346 basis points, a level that does not suggest acute stress but does show the cost of capital rising. Base yields are moving higher, which is pushing up all-in high yield costs. Private credit spreads and CLO spreads are also widening, per other market players, so she sees a precipice of some kind of credit distress. Weaker, more leveraged borrowers and their equities are already feeling the pain. She does not think borrowing costs are too high yet, but the key watch item into 2027 is whether all-in credit costs get high enough to crimp corporate spending. Distress is possible, though not necessarily as acute as the stress of the last couple of years.

“Triple C credit widening, which has been extraordinary, it's nearly at a thousand basis points... It's now spreading into things like high yield. Now high yield is still about three forty six basis points. That's nothing that's wide, that nothing suggests really acute stress”at 3:22

Cameron Dawson · NewEdge Wealth

Financial conditions only slightly tighter, near easiest since 2021; markets still open, just pricier.

Financial conditions are tightening slightly but are nowhere near tight. The Bloomberg Financial Conditions Index is only a hair off its easiest level since 2021. As evidence, SpaceX borrowing $40 billion to buy chips shows that the cost to borrow is higher, but markets are not shut down and companies can still access capital; they just have to pay more.

“Financial conditions are tightening a slight slight bit, but in no way shape or form are they tight... You look at the Bloomberg Financial Conditions Index. It is still just a hair off of its easiest level since 2021.”at 4:48

Cameron Dawson · NewEdge Wealth

Consumers may reject AI-generated media content; younger viewers see it as slop.

Media industry job cuts (around 200,000 globally over recent years) mean companies are cutting into creative capacity. She raises the question of whether consumers will embrace AI-generated content, arguing that the younger generation sees it as slop and that people are increasingly demanding human content, so cutting creative staff may be a mistake at the moment consumers want more human output.

“I think a really big question is will consumers embrace AI generated content? It seems like the younger generation sees it as slop.”at 1:47

Cameron Dawson · NewEdge Wealth

Too many bulls relative to lackluster returns; consensus confidence likely to correct.

Returns have been lackluster over the last six months or so, yet a chart from Jeff DeGraff at Renaissance Macro shows many people identifying as bulls. There is more bullishness than returns would suggest, which points to a correction in consensus confidence in equity markets.

“Given the fact that overall returns have been lackluster over the last six months or so, you have too many bulls. Meaning, there is more bullishness than returns would suggest, which just suggests that you have... You'll have some kind of correction in consensus, confidence.”at 5:58

Cameron Dawson · NewEdge Wealth

S&P 500 holds its 50-day average, but terrible breadth means forward returns likely stay anemic.

Using technical analysis, the trend at the top of the market is still very strong: the S&P 500 has not cracked its 50-day moving average despite the surge in yields and oil prices. Under the surface, however, breadth is terrible and there is weakness in cyclical parts of the market. Combined with higher credit spreads and intermarket signals, she concludes that forward returns should likely continue to be anemic, as they have been for the last four months.

“The trend in the overall top of the market is still very strong. The S and P 500 has not cracked its 50 moving average despite the surge in yields, despite the surge in oil prices. But as we all know, breadth is terrible.”at 6:47