Since 2002 we have been in a bull market for riskier assets, and in the market for risk, generally. This rally in the appetite for risk was manifested by record narrow yield spreads on junk bonds, exuberant multiples for small stocks, very low capitalization rates (yields) on commercial real estate and, among other things, a very strong performance by emerging market equity and debt.
As markets do, this bull market in risk went farther than most people thought it would and much farther than we felt was justified by the underlying fundamentals. Indeed, the market in risk reached “bubble” proportions – until yesterday.

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