Fears of a broad deterioration in credit that emerged a year ago have proven largely unfounded, as a stronger-than-expected economy continues to drive, in the aggregate, robust corporate fundamentals. However, uncertainty is creeping in once again on policy, geopolitics (and the impact on oil and other commodities), and the opportunity and disruption that are part of the artificial intelligence (AI) story.
What are we watching? The path of interest rates, and the impact on inflation and interest rate-sensitive sectors of the economy; the promise of AI, where the focus is shifting from enablers to adopters, to business models and returns; the strength of consumer spending, where some cracks are forming around job security and the weight of elevated prices and the cost of borrowing; and the sustainability of corporate earnings growth, which is on a record-setting run.
While credit spreads have moved wider across the credit curve (except for a much…
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