Last week equity and credit markets continued their rally with US equity market leading the way. The S&P500 remains near its all-time high driven by better than expected earnings and a lower probability of a Federal Reserve interest rate increase. Technology companies (Google, EBAY, Microsoft) were the primary driver climbing more than 7.8%.   This rally was sustained for most of July resulting in a 6.02% return for S&P/ASX 200 against a 0.59% return for the Ausbond Composite Index (see comparable returns below). We are cautious of this rally given the economic and political backdrop but are also very cautious that lower interest rates will inevitably push the marginal investor up the risk curve.   The domestic gaming sector remains a busy place for credit investors. Last week ratings agency Moody’s removed Crown Resort of its list for review meaning its outlook is now stable. At the same time Aristocrat Leisure’s outlook was revised to positive by S&P citing improved operating performance across its gaming portfolio. Finally, this morning Tabcorp Holdings announced the acquisition of INTECQ Limited via scheme of arrangement. These actions are broadly positive for the sector but they highlight the risks (both upside and downside) involved in a rapidly changing technology led sector.   Last week we released the report “Second Half 2016 Outlook: Where to from here?”. In this report we identified Australian companies (debt issuers) who we expect will report slightly weaker headline results (revenue). Our biggest concern remains the banks possible capital shortfall as regulation evolves and potential book value write-downs for UK/Europe commercial property exposures. We also expect the trend of an increasing number of shareholder friendly initiatives to continue and management being forced into acquisitions as organic revenue growth is limited.   Relevant companies reporting this week: • Genworth Mortgage Insurance Australia (ASX: GMA) (1H16) – 3 August 2016 (Wednesday) • Tabcorp Holdings (ASX: TAH) (FY16) – 4 August 2016(Thursday) • Suncorp Group (ASX: SUN) (FY16) – 4 August 2016 (Thursday)   Click below for Interactive Charts Chart 1: Bloomberg AUSBond Composite Index (Monthly) Chart 2: Bonds vs Equities 2015/2016 (Monthly)