The credit cycle has been extended — but what’s next?
Investment-grade credit has been true to its core role in 2024, serving as a cornerstone of stability, a reliable source of income, and a vital provider of overall portfolio diversification. Despite elevated volatility in equity and interest-rate markets, corporate credit has remained remarkably resilient. An extension of the credit cycle — a theme we explored earlier in the year — has resulted in an environment where spreads have remained within a range, with gradual spread tightening being propelled by strong fundamentals, a favorable technical environment, and an accommodative macroeconomic backdrop. This supportive backdrop has allowed investors to benefit from the attractive income offered by the asset class, while small, short-lived bouts of volatility have provided further opportunities to rotate portfolio exposures. As we look ahead, we assess the current state of the credit cycle and consider potential sources of opportunity for active credit investors in the year ahead.
