One week ago, as the market was tumbling at the fastest pace since the covid crash seemingly unable to find a floor, we pointed out the relative stability of credit and said that the top question posed by Goldman clients, one which looked even beyond the carnage in stocks, was "what breaks the stability in credit?" After all, it's a brake in credit that would draw the Fed out of hibernation (not to mention lead to a prompt collapse in the economy). In response, Goldman credit trader, Abel Elizalde (full note here), proposed four possible answers on what could finally break credit out of its complacent stupor:

1. Hard data confirmation that the economy is deteriorating: I think the thing that would do it is higher unemployment. This will hit corporates’ earnings potential, their only silver lining (considering that funding costs are pretty high). European unemployment was lower last week and US one barely moved from very low levels.
2. Outflows: your guess is as good as mine but so far we’re not seeing them. In Europe, IG YtD returns have gotten negative after the rates move … but maybe the higher yields bring more yield buyers. In the US, from GS Research team, “While valuations remain historically tight relative to longer-term history, the ride for investors is cushioned by duration and should help them, all else equal, to remain in the asset class.”
3. Equities X% lower. But nobody seems to agree what that X% is. And maybe the US administration has reached their “strike” around equity levels and start smoothing the execution of their economic plans.
4. A curve ball – think Russia-Ukraine conflict getting out of control.

And though none of these necessary conditions for a credit unwind have so far materialized, investors are starting to sweat the arrival of the proverbial "next shoe to drop", and in a Friday note Goldman follows up that over the last two weeks, it has seen a "STARK" increase of clients looking to hedge their portfolios via credit downside.