The stock market has been on a liquidity binge courtesy of the Fed. With phase 1 trade deal in the books the worries of an imminent recession have subsided lately but one area we see trouble brewing is the high yield debt market. The High-yield bonds (junk bonds) have rallied strongly despite the lack of improved sales or improved corporate earnings. If the anticipated improvement in the fundamentals governing corporate credit quality do not materialize, a significant widening of high-yield bond spreads is likely, We are concerned that next year could see economic shocks and trouble for U.S. high-yield debt. Our outlook is for the U.S. economy to contract by either the 2nd or 3rd quarter of next year. If such a scenario plays out, defaults on speculative-grade, or junk, bonds could rise as much as threefold next year, given all of the debt that risky companies have taken out recently. A high level of debt at U.S. companies with sub-par credit ratings is likely to magnify problems in the junk-bond market. We see companies struggle to refinance debt as corporations are not adding to the economy with the leverage on the rise and in our view, this is the one area of the market that can trigger the first domino to fall.