Credit markets in focus in 2024 (2024)

FAQs

Credit markets in focus in 2024? ›

In 2024 we remain positive on the credit market, anticipating strong total returns and continued demand from yield and duration buyers. Investors are looking to add high-quality duration and to move away from short-maturity investment solutions, made less attractive by major central banks' expected interest rate cuts.

Entering 2024, market pricing suggested meaningful odds for the first cut in March 2024, and implied more than six 25bp rate cuts for the year. By late-March, that had been reduced to just over three cuts beginning in July 2024 (Exhibit 1).

Key Takeaways. 2024 could extend the trend of rewarding years in direct lending strategies, in our view. While higher-for-longer interest rates, slower growth and stickier inflation may present challenges for some borrowers, we don't expect credit losses to become unhinged.

Private credit is predicted to grow in 2024, as numerous leveraged loans and high-yield bonds reach their maturity wall and will need to be refinanced. With M&A volumes down, investors will be looking for new ways to exit investments.

Another common element of reform is the dismantling of mandatory directed credit program. These programs force banks to allocate part of their loan portfolio to unprofitable sectors at subsidized interest rates. Banks must then make up the losses by charging higher spreads to non-preferential sectors.

Economic growth is projected to slow in 2024 amid increased unemployment and lower inflation. CBO expects the Federal Reserve to respond by reducing interest rates, starting in the middle of the year. In CBO's projections, economic growth rebounds in 2025 and then moderates in later years.

The Big Money bulls forecast that the Dow Jones Industrial Average will end 2024 at about 41,231, 9% higher than current levels. Market optimists had a mean forecast of 5461 for the S&P 500 and 17,143 for the Nasdaq Composite —up 9% and 10%, respectively, from where the indexes were trading on May 1.

But until the Fed sees evidence of slowing economic growth, interest rates will stay higher for longer. The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025.

As at the 20th of May, the ASX 30 Day Interbank Cash Rate Futures June 2024 contract was trading at 95.69, indicating a 10% expectation of an interest rate decrease to 4.10% at the next RBA Board meeting.

NRF described consumers as resilient. National Retail Federation today forecast that retail sales will increase in 2024 between 2.5% and 3.5% to between $5.23 trillion and $5.28 trillion. And that massive figure doesn't even include cars, gas and restaurants.

What are the trends in private equity in 2024? ›

Private equity firms will focus on five key trends in 2024. Deploying artificial intelligence will lead the way, followed by investment in infrastructure particularly related to energy projects. Value creation will also be a priority as firms seek to improve strategic and operational efficiency.

The private credit market, in which specialized non-bank financial institutions such as investment funds lend to corporate borrowers, topped $2.1 trillion globally last year in assets and committed capital.

In its latest five-year private markets outlook, Preqin forecasts that private credit will nearly double in size reaching $2.8 trillion by the end of 2028, after most investors it surveyed confirmed that they expect to invest even more money in this asset class.

Credit market equilibrium occurs at the real interest rate where the quantity of loans supplied equals the quantity of loans demanded. At this equilibrium real interest rate, lenders lend as much as they wish, and borrowers can borrow as much as they wish.

The four types of credit market instruments are bonds, treasury bills, commercial paper, and bankers' acceptance.

Credit risk: The risk that a borrower or counterparty may default on their obligations and fail to repay debt. This can lead to losses for the lender. Market risk: The risk of losses from changes in market factors like stock prices, interest rates, foreign exchange rates, and commodity prices.

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The April Housing Forecast from Fannie Mae puts the average 30-year fixed rate at 6.7% during the first quarter of 2024, falling to 6.4% by year-end. This reflects an upward revision in Fannie's analysis: Two months ago, the mortgage giant expected rates would dip below 6% at the end of this year.

The national average rate for savings accounts will be 0.3 percent by the end of 2024, McBride forecasts, while predicting an average of 0.35 percent for money market accounts.

But market strategists on average are anticipating the S & P 500 will fall to 5,220 by the end of 2024, according to CNBC's Market Strategist Survey . After Wilson's about-face, JPMorgan's Dubravko Lakos-Bujas now holds the most bearish view, at 4,200 — implying stocks will plunge more than 20% from current levels.

This year will not be as easy. Investors should expect more volatility, and times when an overall bullish view of the market will be in jeopardy. That said, there are five significant reasons to support why 2024 could be another good year for equity investors.