TCW's Rivelle: Credit-Fueled Expansion Will Not End Well

The video discusses the asset price cycle over the last 25 years, highlighting how the Fed's rate policies have led to increased asset prices without corresponding GDP growth. It emphasizes the importance of building defensive portfolios during the current cycle phase, identifying breakable and bendable assets. The US Aggregate Index's leverage trends are analyzed, noting increased corporate leverage without income growth, leading to potential market risks.

What is the primary characteristic of the asset price cycle discussed in the first section?

• A cycle with decreasing asset prices

• A cycle with stable leverage ratios

• An asset price cycle driven by rate cuts

• A traditional business cycle with GDP growth

During which part of the cycle should investors focus on building a defensive portfolio?

• The 20% characterized by deleveraging

• The first 10% of the cycle

• The last 10% of the cycle

• The 80% characterized by re-leveraging

Which type of assets should be avoided in a defensive portfolio?

• Breakable assets

• Bendable assets

• AAA-rated securities

• Investment-grade credit

What has been the trend in leverage ratios in the investment-grade sector?

• Decreasing leverage ratios

• Stable leverage ratios

• No change in leverage ratios

• Significant increase in leverage ratios

What is a major risk associated with high leverage in the corporate sector?

• Increased GDP growth

• Decreased asset prices

• Stable earnings

• Earnings recession