Public or Private? A Strategic Question

  • We prefer private to public credit long term on better return potential. It’s the mirror image in equity: We prefer public stocks as risks fade in the medium term.
  • U.S. stocks hit 2023 highs on hopes for a debt ceiling deal. Yields climbed on odds of another rate hike versus a pause or cuts. We don’t see rate cuts this year.
  • U.S. PCE this week will help gauge inflation’s persistence. We see wage pressure from worker shortages keeping inflation above policy targets for some time.

The banking tumult has reshaped opportunities for income: We now favor private over public credit on a strategic horizon of five years and longer. We think private credit could help fill a void left by banks pulling back on some lending and offer potentially attractive yields to investors. We see a mirror image in equity, strategically preferring public to private: Public stocks have repriced more than markets like private equity, and we see risks fading over a medium-term horizon.

Yield Appeal