What we’re reading (1/19)
“S&P 500 Closes At A New All-Time High As Fresh Data Drives Optimism For Rate Cuts” (Business Insider). “Strong economic data fueled the S&P 500 to a record on Friday, with markets getting more optimistic about potential rate cuts from the Federal Reserve. Soon after trading began, the benchmark index was already on pace to clear its all-time closing high of 4,796.56 set two years ago. And by midday, it cleared its intraday record of 4,818.62.”
“A Hot Debt Market Is Slashing Borrowing Costs For Riskier Companies” (Wall Street Journal). “Companies with low credit ratings are rushing to slash their borrowing costs even before the Federal Reserve makes a single interest-rate cut. As of Thursday morning, companies such as SeaWorld Entertainment and Dave & Buster’s had asked investors to cut the interest rates on some $62 billion of sub-investment grade loans in January—already the largest monthly total in three years, according to PitchBook LCD…Prices of so-called leveraged loans, which are often used to fund private-equity buyouts, have climbed especially high, in part because a slowdown in those deals has led to lack of new loans entering the market.”
“AQR: How To Model Future Returns And Risks Of Private Credit” (Institutional Investor). “According to AQR, there are factors that could drive up private credit’s return, including the illiquidity premium, the borrower’s willingness to pay more for the flexibility and certainty that private credit offers, fewer defaults, better workouts when things go wrong, and the disintermediation of banks. But there are strikes against private credit, too. Private credit managers charge higher fees, and AQR suggests that investors may overpay for price smoothing. Credit quality deterioration could also be hidden from investors, as private credit managers report information less frequently than their public credit peers.”
“China’s Economy Is In Serious Trouble” (Paul Krugman, New York Times). “[T]he Chinese economy seems to be stumbling. Even the official statistics say that China is experiencing Japan-style deflation and high youth unemployment. It’s not a full-blown crisis, at least not yet, but there’s reason to believe that China is entering an era of stagnation and disappointment.”
“Nato Warns Of All-Out War With Russia In Next 20 Years” (The Telegraph). “Civilians must prepare for all-out war with Russia in the next 20 years, a top Nato military official has warned. While armed forces are primed for the outbreak of war, private citizens need to be ready for a conflict that would require wholesale change in their lives, Adml Rob Bauer said on Thursday.”
