2025: Setting Expectations

This podcast explores Morgan Stanley's forecast for credit markets in 2025. Andrew Sheets, the head of corporate credit research, discusses a promising scenario where credit performs well in the first half, thanks to attractive yields and low corporate borrowing rates. He presents a bullish outlook reminiscent of the mid-1990s, highlighting a period where high interest rates were paired with robust economic growth and narrowing credit spreads. Conversely, he outlines a bearish scenario considering potential rapid economic shifts or policy changes. The conversation wraps up by noting that the current economic environment may be ideal for credit, though it differs significantly from the mid-90s. A key highlight is the total yield on US investment-grade corporate bonds, which has risen above 5.4%, a crucial element driving demand.