Market
Memos from Howard Marks: Shall We Repeal the Laws of Economics?With interest rates high, increased market volatility and banking sector stress, the loan market has quickly shifted to favoring private credit. This may create a historic opportunity for investors to allocate part of their investment portfolio to the asset class.
For more than a decade, historically low interest rates meant easy money for borrowers but challenges for lenders, who faced compressed profit margins. Recent U.S. Federal Reserve (Fed) rate hikes, spurred by persistent inflation, have changed that equation. Now, many banks are de-risking balance sheets and struggling to extend new loans at a time when they are overwhelmed by applications for credit from corporations and private equity sponsors, and private equity “dry powder” is near record levels.
This has important implications: