Worst Spate of Downgrades Since 2021 Signals Pain
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UnitedHealth Group Incorporated (UNH): “Medicare Fraud Is Prison,” Warns Jim Cramer
UnitedHealth Group Incorporated (NYSE:UNH) is the largest healthcare benefits provider in America. The shares have lost 40% year-to-date. Cramer’s recent remarks about the firm discussed media reports of impropriety and pointed out that UnitedHealth Group wouldn’t be buying shares if they were true. He had a much darker tone: “Medicare fraud is prison. And it’’s probably the most I think easily, the crimes are easily followed and the judgement is swift.”
UnitedHealth Group Incorporated (NYSE:UNH) is the largest healthcare benefits provider in America. It is also one of the worst-performing stocks in 2025 as the shares have lost 40% year-to-date. UnitedHealth Group Incorporated (NYSE:UNH)’s shares sank by a massive 27.3% in April after the firm stunned investors by missing analyst estimates for its latest quarter. Cramer’s recent remarks about the firm discussed media reports of impropriety and pointed out that UnitedHealth Group Incorporated (NYSE:UNH) wouldn’t be buying shares if they were true. However, this time, he had a much darker tone:
“[On a WSJ report that UNH deploys doctors and nurses to gather diagnoses that bolster its payments with UNH responding that it welcomes reviews] Well I’m glad they welcome it but I do want to caution them, and I think I happen to like this CEO very much, but Medicare fraud is prison. It’s not, hey listen we’ll slap UNH on the wrist. It’s prison. And it’s probably the most I think easily, the crimes are easily followed and the judgement is swift. The reason why people are so focused on this is that it’s not a fine.”
Previously, the CNBC host discussed UnitedHealth Group Incorporated (NYSE:UNH) in detail:
“The third worst performer was, wow, UnitedHealth Group, suddenly very troubled managed care company that used to be the ultimate darling in the group. It’s down 38% in the first half. UnitedHealth’s troubles are very well documented. I’m not even talking about the assassination last December, as terrible as that was. The real trouble started in April when the company reported a weak quarter, dragged down by high utilization rates, meaning people are getting much more healthcare than UNH… needs to pay for.
UnitedHealth Group Incorporated (UNH): “Medicare Fraud Is Prison,” Warns Jim Cramer
A senior healthcare professional giving advice to a patient in a clinic.
Worst Spate of Downgrades Since 2021 Signals Pain
In the second quarter, around $94 billion of high-grade US debt was downgraded, compared with just $78 billion of upgrades. It was the first time since early 2021 that downgrades outpaced upgrades in dollar terms. More companies are at risk of being demoted later this year as economic uncertainty rises. The second quarter earnings season begins in the US in the coming week, and will give more insight as to how companies are faring.. Portfolio managers in the U.S. and Europe are selling default protection at an increasing pace, a signal they see little risk on the. horizon. Their position on the main investment-grade. US credit-default swap index now amounts to over $105 billion, the most in at least three years, based on. data compiled by Barclays Plc and Bloomberg.
In the second quarter, around $94 billion of high-grade US debt was downgraded, compared with just $78 billion of upgrades, according to JPMorgan Chase & Co. strategists. It was the first time since early 2021 that downgrades outpaced upgrades in dollar terms, and more companies are at risk of being demoted later this year as economic uncertainty rises, JPMorgan strategists including Eric Beinstein and Silvi Mantri wrote this week.
The economy faces unknowns now including whether trade wars will keep escalating. But corporate bond valuations are high, with US investment-grade spreads this week hovering around 0.8 percentage point, well below the two-decade average of around 1.5 percentage point. For junk securities, spreads are closer to about 2.8 percentage points, far short of the 4.9 percentage point average going back 20 years. That makes picking the right bonds crucial.
“Credit picking is super important now. You have to get your calls right,” said Jon Curran, head of investment grade credit at Principal Asset Management, in an interview. “The vulnerability to downgrades is higher.”
There are other reasons to be worried about credit quality now. High-yield borrowers are delaying about 9% of interest payments globally, known as paying in kind, according to JPMorgan Asset Management’s Oksana Aronov, up from about 4% in 2020. And cash balances at high-grade US companies are showing signs of starting to fall. The second quarter earnings season begins in the US in the coming week, and will give more insight as to how companies are faring.
Pacific Investment Management Co., overseeing $2 trillion, has been cautious in industries like retail that are facing long-term decline or those exposed to near-term risk of boosting borrowings, like metals and mining, homebuilders and autos, according to Sonali Pier, multi-sector credit portfolio manager at Pimco. She’s leaning into sectors likely to continue to benefiting from strong free cash flow and earnings growth trends, like banks and pipeline companies and more defensive sectors like healthcare, utilities and defense.
“We’ve maintained a light footprint in areas of the market where we foresee more downgrade and fallen angel risk,” said Pier.
Many investors are optimistic that company credit will generally remain strong. Overall US corporate yields remain high by the standards of the last decade. Portfolio managers in the US and Europe are selling default protection at an increasing pace, a signal they see little risk on the horizon. Their position on the main investment-grade US credit-default swap index now amounts to over $105 billion, the most in at least three years, based on data compiled by Barclays Plc and Bloomberg. It’s a similar story in Europe.
But by at least some measures, including not just ratings downgrades but also companies losing investment-grade status, the outlook is deteriorating. In the second quarter, there were about $34 billion of debt known as Fallen Angels, or bonds cut to junk, compared with just $3 billion of rising stars, JPMorgan strategists said. And on Friday, US President Donald Trump threatened a 35% tariff on some Canadian goods, ramping up his trade rhetoric.
“Businesses are vulnerable to tariffs but also living with uncertainty,” said Christina Padgett, head of leveraged finance and private credit research at Moody’s Ratings. “It’s not confirmed for a lot of businesses what their fate is.”
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