Strategists predict a tougher period ahead for U.S. corporate bonds after a slide in equities to more appealing levels.

The S&P 500 index’s near-10 per cent drop from its Sept. 2 record burnishes the allure of equities versus credit, according to Evercore ISI, while BMO Capital Markets recommends investors should be “underweight” corporate bonds.

Stocks are “attractive relative to credit” on a six-month view, Dennis DeBusschere, a strategist at Evercore ISI, wrote in a note.

Junk bonds are on the longest losing streak in six months on concerns about rising virus cases as well as the U.S. economic outlook in the absence of further fiscal stimulus. Higher-rated bonds -- the focus of the Federal Reserve’s corporate-debt buying program -- have proved more resilient.

Amid the more challenging backdrop, Cantor Fitzgerald LP’s Head of Equity Derivatives Eric Johnston recommends a bearish options trade on the iShares iBoxx High Yield Corporate Bond ETF.

Investment grade credit spreads on Thursday widened beyond a range in place since July, BMO’s Dan Krieter wrote in a note.

Investors should “take advantage of buying opportunities in late-October/early-November” if U.S. election jitters buffet markets, since credit spreads are expected to be “extremely low” in 2021, he said.