Global Credit Quarterly: 2Q2025

Key takeaways

• Macro: Policy uncertainty is elevated due to shifts in the global trade landscape. In the U.S., we foresee a more challenging growth, inflation and policy mix; above target inflation may limit scope for rate cuts. That said, we expect a slowing of growth and not a recession.
• Consumer and corporate sentiment: We see risk that economic activity ‘catches down’ to weaker sentiment data. High frequency labor market data and company commentary will be key to monitor, given the ‘feedback loop’ between corporate margins, the layoff rate, consumer spending, and overall economic activity. 
• Liquid credit: We continue to prioritize income. While we expect some additional spread widening, the magnitude may be somewhat tempered by corporates’ solid fundamentals and other technical factors. Sector dispersion should increase.
• Private credit: The ongoing expansion of private credit’s addressable markets (investors and borrowers) reinforces its ‘staying power.’ Past periods of market volatility have provided opportunities for private credit to serve as a stabilizing source of financing for a wide range of borrowers in a variety of market conditions. 
• Commercial real estate (CRE): Amid an ongoing recovery in CRE transaction volumes, loan extensions in challenged subsets (namely, office) will likely remain an overhang.
• Risks to our view: Upside: A scaling back of tariffs could limit pressure on corporate profit margins and inflationary pressures. Downside: Persistently elevated tariff rates could negatively impact corporate margins, which may pressure the labor market and economic activity.

Past commentary

• 1Q2025
• 4Q2024
• 3Q2024