Federal Shutdown Drags Into Third Week Amid Uncertain Resolution
Harvey Schwartz, the CEO of Carlyle Group, has voiced concerns about credit markets as the economy approaches a late cycle. Speaking to Bloomberg News, he emphasized that credit should be a key focus for investors during this uncertain period.
Credit Market Concerns in a Late Cycle
Schwartz, who jokingly describes himself as the “chief worry officer” at Carlyle, acknowledges the resilience seen in current markets. He warns that any negative news can trigger disruptions, particularly during late economic cycles.
Historical Context of Credit Cycles
According to Schwartz, it has been a long time since the market experienced a recession-driven credit cycle. This absence of recent downturns makes it reasonable for investors to feel anxious about credit performance.
Systemic Risk Perspective
Despite the potential for challenges, Schwartz believes that a credit cycle does not necessarily lead to a complete market collapse. He points out that systemic risk needs to be monitored, but not overstated.
Bank Stock Volatility
In recent weeks, bank stocks have shown significant volatility. This instability is largely attributed to fears regarding regional banks and their exposure to credit, especially concerning loans associated with two bankrupt companies in the auto industry.
- Key Concerns: Credit limits during late cycles should be watched.
- Market Disruptions: Any news can lead to market upheaval.
- Systematic Risk: A credit cycle doesn’t guarantee total market failure.
- Bank Volatility: Recent weeks show fluctuating bank stock values.
As the Federal shutdown drags into a third week amidst economic uncertainty, the focus remains on sustaining market resilience and managing risks effectively.
