PGIM Credit’s co-CIO says we are in the early stages of credit crowding

Two pools of capital – the franchising of AI digital infrastructure buildout and government spending – are interest rate-insensitive and require a massive quantum of debt, says Gregory Peters, co-chief investment officer at PGIM Credit.

Peters, who in his role oversees $1.2 trillion of assets under management, says the Federal Reserve has to hike interest rates to remain credible. But even with a few more hikes, he doesn’t see the current policy as being restrictive.

“I’m not sure It quells inflation either,” Peters says.

A slowdown of the AI buildout and capex would be a positive for investors and also help to stem inflation, he argues. Whether that will happen, though, is “still very much an open question.” But he notes that this will be the key driver of investment returns here over the next 12-24 months.

“History shines a very poor light on excess capital being deployed in a short period of time,” he says. “It’s a trail of tears.”

In addition, Peters shares his insights on emerging markets, Europe, Asia, and public and private debt markets.