Lotfi Karoui
Latest Insights
As AI-related borrowing grows, securitized credit and emerging markets may offer investors a wider lens on diversification.
Higher real yields may pressure property valuations, but healthier financing conditions make a repeat of the 2023 credit shock less likely.
Higher yields have improved bonds’ income and diversification potential, but the same reset is testing weaker borrowers, leveraged AI financing, and rate-sensitive real estate.
Amid AI disruption risk and elevated refinancing costs, we can expect a valuation gap to persist between software loans and the broader loan market.
After years of abundant capital and intense competition that produced increasingly borrower-friendly terms, the tide may be shifting.
This year’s energy price shock isn’t exactly following the historical playbook, with markets and economies absorbing much of the impact – though clear risks remain.
Despite a sharp rise in AI-related borrowing, signs of broad corporate credit market disruption remain limited.
AI capital spending may be contributing to higher real rates, but there is little evidence that it’s due to AI bond issuance crowding out Treasuries.
For equity investors, the question is relatively simple: Who wins the AI race? For credit investors, it is more nuanced: Do spreads adequately compensate for the broad set of risks embedded in financing the buildout?
Balanced portfolios are back: Higher bond yields are restoring fixed income’s role as both a potential source of income and a powerful diversifier.
With resilience concentrated among wealthier households, investors should prioritize quality and structure across consumer-linked ABF investments.
Most U.S. investment grade and high yield borrowers appear positioned to withstand refinancing costs, but CCC rated issuers face greater pressure as elevated yields meet weaker balance sheets.