Private Credit Markets: Here’s What Might be “Around the Corner”

“On the cusp of a CCC rating”

You’ve probably heard of the Blackstone Group, the world’s largest alternative asset manager.

The firm is a big player in the $1.4 trillion private credit market, which involves lending money directly to companies, thereby bypassing banks.

However, as you might imagine, there are risks. As Bloomberg stated last October:

Most middle-market private credit sits on the cusp of a CCC rating.

Our February Global Market Perspective noted that transparency is an issue:

Deals that are on the books of private credit companies are not as easily seen… There could be some ticking time bombs lurking beneath the surface… If there are any issues looming, then we would expect to see that coming through in the share price of these companies.

Our February Global Market Perspective also showed this chart (keep in mind that Elliott wave labels are available to subscribers).

Looking at Blackstone, it seems likely that a significant decline in the share price is dead ahead if this Elliott wave analysis is correct. What is interesting is that Blackstone has been underperforming the overall Banks Index (BKX) since the middle of last year.

This is a clue that, perhaps, an implosion in the private credit markets might be around the corner.

Fast forward to the just-published April Global Market Perspective.

Since [our February Global Market Perspective published], the share price [of Blackstone Group] has declined by 13%.

In July 2007, two Bear Stearns subprime-lending-related funds collapsed, a warning shot that eventually led to credit markets seizing up and a global financial crisis.

The failure of Silicon Valley Bank and other banks is another sign that another financial crisis may be just around the corner.

Yet, these are by no means all the signs.

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