The tide of easy money pushes everything upwards – Satori Insights founder Matt King
The end of the US government shutdown has paved the way for a “renewed melt up,” says Matt King, founder of Satori Insights, on the latest episode of Credit Exchange with Lisa Lee. Not just risk assets like equities and credit, but things like gold and Swiss francs, as people worry about how this ends – even as the tide of easy money pushes everything upwards, says King, formerly Citi’s global markets strategist and one of the most widely-followed commentators on financial markets.Since early 2024, the linkage between central bank liquidity and credit spreads and equities has weakened somewhat. It’s not disappeared entirely, but in equities especially, different factors have had an impact. Exuberance and excitement around AI are part of the story, King says, but there’s also ongoing support from fiscal policy and huge fiscal deficits, as well as the massive growth in repo to around a trillion dollars a year, which is becoming increasingly important.“It’s about how much money we’re creating and where that money is then going,” King argues. “I think that’s the main mistake investors have made. If you’ve tried to invest on the basis of your economic view, for over a decade, you’ve struggled, because the drivers here are markets first, and then the economy bringing up the rear.”
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Lessons learned from First Brands and Tricolor – Tetragon co-CIO Dagmara Michalczuk
The bankruptcies of auto sector firms First Brands and Tricolor Holdings hold “lessons for the future” for credit investors, says Tetragon co-CIO Dagmara Michalczuk on the latest episode of Credit Exchange with Lisa Lee. “The governance issue, although it seems like a soft and fuzzy idea, is incredibly important,” Michalczuk says. “Investing with folks that are not transparent – that has its risks. Lessons can be learned and should have been learned, in both instances.”Overall, Michalczuk’s assessment of the general macro outlook sees slow growth, “slower than what we saw post-pandemic.” With this said, she agrees with the consensus view in the market that 2026 might see a reacceleration of growth, given the downward trajectory of rates, significant fiscal stimulus in the US and Europe, deregulation, and the ongoing capital investment in AI.Credit investors should be prudent and have informed views and opinions on AI, Michalczuk says. At Tetragon, Michalczuk’s team is adapting by looking across their portfolio, “not just [at] software and tech companies, but all of our exposures,” considering both potential positive and negative impacts. “The big concern… is we’re missing something, [that] a business very rapidly becomes undone by a newcomer that disrupts the industry.” That’s why continual reanalysis over time is important, Michalczuk says.
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Due diligence matters in credit investing – Crescent president Chris Wright
“There are lots of mixed signals out there,” says Chris Wright, president of Crescent Capital Group, on the latest episode of Credit Exchange with Lisa Lee. That’s creating uncertainty. “When we think about the investment environment, we approach it with caution.”On the bankruptcies of First Brands and Tricolor, Wright doesn’t see them as canaries in the coalmine or a tipping point in the economy. But they do show that due diligence matters. There were audit flags, governance failures, and opaque structures that sounded warning bells. “We have to be diligent in our work,” Wright notes.Crescent, a global credit manager with almost $50bn in AUM, recently launched a CLO ETF and has plans to introduce other product, Wright adds. While too early to say whether Crescent will start a European CLO management business, it’s “certainly something that is on our drawing board and we’re spending a lot of time thinking about and assessing,”, Wright says.
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ABF increases the lending toolkit – Apollo co-head of asset-backed finance Bret Leas
Bret Leas, co-head of asset-backed finance at Apollo Global Management, speaks about this booming segment of private credit with Credit Exchange host Lisa Lee, managing editor at Creditflux and editor-at-large at Debtwire. Leas can see the private credit market exceeding the current growth forecast of $40 trillion, and that will have repercussions. “The financing toolkit has gotten so much broader,” he observes.Leas says both public and private investments can be risky and safe. He cautions that there are excesses in the system. Leverage has been ticking up steadily and documentation, especially in the public markets, has been very weak for some time. “There is a level of diligence that you need to do when lending money,” Leas says.For ABF, Europe probably represents a bigger opportunity than the US, Leas contends. The continent has a very narrow banking system and an insurance system that is underinvested. “You have countries that have been so far behind in their build that the ability to catch up through traditional means is very, very unlikely.”Leas also discusses the war for talent, trading of investment-grade private loans, and the knock-on effects of the spending on artificial intelligence.
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Expect more corporations to default – JPMorgan head of global credit financing Jake Pollack
“The idea that default rates will go up over time is not particularly difficult to get to,” says Jake Pollack, head of global credit financing and North America credit trading at JPMorgan, on the latest Credit Exchange podcast with Lisa Lee. “The markets have been very sanguine, and it won’t be surprising if we see more defaults in the coming months and even years.”Corporate America is doing well, despite some headline-grabbing bankruptcies recently. But Pollack notes that spreads are very tight, which means there’s a lot of capital chasing opportunities. As recent bouts of volatility have demonstrated, it doesn’t take a lot for spreads to widen out.Pollack also tips trading in private credit to increase, especially if the definition of private credit is widened to incorporate private investment grade debt and structured notes. But trading in traditional direct lending loans is less likely to take off.This means that there will be certain areas where that illiquidity premium goes away as the market looks more like its public counterparts. There will be other areas that are not widely held, that can probably keep the spread premium because it’s simply much less tradable, Pollack says.
Credit Exchange with Lisa Lee. Explore the latest trends in global credit markets with the biggest movers and shapers on Wall Street and the City, hosted by financial reporting veteran Lisa Lee.
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