Corporate bond stress falling - what will it take to change spreads?

Despite all of the noise in politics, policy uncertainty, and geopolitical tensions, corporate bond spreads have fallen to levels seen at the beginning of the year. While there was a significant increase in stress in April, overall stress levels remain below the peak during the COVID-19 pandemic. Indeed, the market is sensitive to changes in policies that will impact earnings; yet, corporate buyers have overlooked these risk and uncertainty issues. The next test will be softness in the real economy, yet the link between economic uncertainty and spread risk does not seem strong.