Despite persistent policy uncertainty under the new US administration, the foundational drivers of US economic preeminence remain intact. Structural advantages—such as labor market flexibility, institutional resilience, and innovation capacity—continue to support growth. However, rising tariffs and political volatility have slightly reduced GDP forecasts and temporarily lifted inflation expectations. Equity investors should closely monitor momentum indicators, with selected re-entry points likely to emerge in the coming months. US Equities: Strategic Reassessment and Re-entry Framework While we maintain our constructive stance on US equities—underpinned by GDP growth in the 1–3% range, historically associated with positive equity returns—we are currently adopting a more tactical approach. We remain selective both picking names and entry levels. Recent underperformance aligns with patterns seen in past temporary dislocations, not structural shifts…. Read more
Private Credit’s Yield vs. Traditional Credit: Understanding the Gap
Private credit – loans made by non-bank lenders to mostly mid-sized, non-public companies – has been offering yields near 9% (often even in the low double-digits) in recent years. This substantially exceeds yields in traditional public credit markets (e.g., corporate bonds or broadly syndicated loans). Several factors help explain why private credit carries this yield premium. Below we analyze the key aspects: risk premium, liquidity and market structure, regulatory arbitrage, investor psychology, and sustainability of the private credit boom. 1. Risk Premium: Higher Yields for Higher Risk Private credit’s elevated yields primarily reflect ahigher credit risk premium. The companies borrowing in private credit markets are generally smaller, more leveraged, and less transparent than typical issuers in public bond or loan markets. In essence, private… Read more