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Sun Life Financial put up solid results Thursday morning on the back of improving markets, yet the insurer's CEO remains cautious on the prospects for recover.

What's behind the downbeat tone from business leaders such as Don Stewart at Sun Life ?

It's the lack of clarity on where things are going that scares the money management crowd. Look at the prospects for one corner of the credit market, high yield debt. Standard & Poor's was out Wednesday with a report that showed U.S. junk bond defaults rose to 9.4 per cent in July, from 9.3 per cent in June.

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In picking up on S&P's numbers in a report Thursday, TD Waterhouse said: "S&P expects the speculative-grade default rate to escalate to 13.9 per cent by June 2010, but it could reach as high as 18 per cent if economic conditions are worse than expected."

This is the kind of forcast that haunts Mr. Stewart and other financial services executives, all of whom are major players in credit markets.

The most optimistic forecasts for the next 12 months are for problematic credit markets, with pleny of potholes on recovery road. The worst-case scenario - such as an 18 per cent failure rate from a significant portion of U.S. borrowers - is ugly in the extreme.

That's why Mr. Stewart said on Thursday: "Recent equity market gains are encouraging, however a full, broad-based economic recovery will take time and credit conditions remain a headwind in the current environment."

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