Our latest Global Credit Monitor, penned by co-authors Peter Graf, Jennifer Kozicki, Boris Okuliar and Ruben Valverde, CFA, is now live. Read more for our quarterly macro market analysis across key regions: https://lnkd.in/eC5FEAWa
The march is on: Canada, the European Central Bank, Sweden and Switzerland (2x) have all cut base rates, with more cuts expected before year-end. Still, we believe this is unlikely to mark the true ‘beginning of the end’ for high base rates. Inflation remains sticky as borrowers continue to face headwinds. Add to that, the U.S. Federal Reserve is unlikely to cut aggressively, which will make it harder for other countries to cut repeatedly given the U.S. economy’s anchoring effect on global markets. “Slightly less high for longer” seems to be the view for now…unless something breaks. Election results are rolling through globally, including plenty of surprises across the European Union, France, India, Mexico and others. The general trend toward more nationalistic policies—including in-sourcing, lower immigration and tariffs—is unlikely to help bring down inflation in the medium-term. Nonetheless, global equity markets have largely brushed them off and hit a number of record highs in recent weeks. At the same time, M&A activity is finally picking up after the quietest period in a decade. As we’ve seen previously, the U.S. and E.U. have led the rest of the world in the pick-up in activity, and Asia is beginning to follow suit. In recent months there has been much debate on: (i) relative value across geographies and asset classes; (ii) the impact of high base rates on yields; and (iii) the compression in the spread of floating rate debt instruments globally. How does the impact of these factors differ from previous cycles? Based on the CS Leverage Loan Index over the last 30 years, the market is clearly suffering from recency bias… ** Along with co-authors Jennifer Kozicki, Boris Okuliar & Ruben Valverde, CFA, pleased to share the latest quarterly Ares Global Credit Monitor including analysis on key trends & updates across the U.S., E.U. and Asia. Full update & charts are here: https://lnkd.in/g8KEeZ2t ** In the APAC region, Japan, India and Australia / New Zealand saw outsized activity for the quarter. Japan continues its recent surge in M&A, in particular for sponsor-backed opportunities, but those volumes are still largely funded by traditional bank lenders. Notably, given the increase in size of the deals, the large banks are reaching concentration limits. This is allowing other credit providers to get in on the action – a view that was recently supported by the Japanese Ministry of Finance. In India, despite a surprising election outcome, equity and debt markets set new records. A strong outlook for credit activity is expected in the second half of the year, including more sponsor exits and buyouts. Australia has seen a pick-up in activity in both M&A and refinancings in the last couple of months after a quieter start to the year, but inflation is sticky, creating a risk of… Ares Management Corporation #investing #markets #leveragedfinance #privatecredit #directlending