FICC Focus Sail Tariff, Default Seas with Alternative Credit: Credit Crunch
Jun 10, 2025
Craig Scordellis, CIO of Credit at CQS UK, brings his expertise in managing $15 billion in credit to discuss the evolving landscape of alternative credit and leveraged finance. He and Mahesh Bhimalingam delve into how recent tariff changes influence global inflation and currency dynamics. They explore credit market risks, the impact of central bank policies, and provide insights on default predictions for Europe and the US. Their conversation highlights emerging investment opportunities despite the prevailing financial challenges.
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Positive Outlook on Alternative Credit
- Alternative credit markets offer promising high single-digit to low double-digit returns post-rate hikes.
- Despite risks like tariffs and inflation, careful selection of sectors and regions can preserve capital.
US Recession Probability Higher Than Europe
- The US faces a 45% recession probability due to high inflation and limited Fed cuts.
- Europe and the UK have lower recession risks, benefiting from potential ECB and BOE rate cuts.
Engage Businesses, Avoid Macro Calls
- Focus credit portfolios on lending to resilient businesses with strong management teams.
- Prioritize risk-adjusted returns over attempting to predict precise macroeconomic cycles.