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How Bad is the Credit Outlook?

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Many metrics of credit risk are on the rise and credit professionals are seriously concerned. According to the latest quarterly credit outlook survey from the International Association of Credit Portfolio Managers (“IACPM”) (emphasis added): “. . . survey respondents see conditions deteriorating in every segment measured.”

The IACPM added (emphasis added): “[Survey respondents] expect credit spreads to widen over the short term for both investment grade credit and high yield debt. They forecast rising defaults over the long term in every region of the world, including Europe, Asia and North America.”

Credit-Default-Outlook_2016-01If you click on the accompanying graph from the IACPM, then you will see that the outlook for credit default rates over the next twelve months in North America (blue line), Europe (green line), Asia (yellow line), and Australia (purple line) are all pointing down. The outlook on average (red line) has an index score of -64, which is its lowest level since the Global Financial Crisis.  

Whether or not you believe credit conditions right now are similar to that of the Global Financial Crisis, please consult an investment fiduciary before making any investment decisions.

 

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