2018 Credit Outlook

By January 25, 2018Market Commentary

CREDIT MARKET OUTLOOK

The fuel of asset inflation and economic expansion since 2009 has been access to and availability of cheap capital. Therefore, having a finger on the pulse of these accommodative credit markets provides a critical indication of where we are in the economic cycle. While our take on the credit markets is not pointing us toward a negative outlook for 2018, there are certainly areas we are watching closely given their potential to signal a turn in the economic cycle in the years ahead.

The below piece captures our assessment of and outlook for credit markets in 2018, covering the following key themes that we’re watching closely this year:

SEVEN KEY CREDIT THEMES TO WATCH IN THE YEAR AHEAD

  1. A much-anticipated rise in rates
  2. Interest rates and technical dynamics favoring loans over high yield bonds (with benefits extending to U.S. CLO assets)
  3. The size of today’s credit market (and the setup it creates for the turn of the cycle)
  4. Trends in first-lien leverage and cov-lite as lasting structural changes
  5. The amount of debt within sectors facing cyclical or secular challenges
  6. Credit migration and the potential for market disruption without major defaults
  7. Vulnerability in private debt

Read Highland’s full 2018 Credit Outlook on Harvest >>