1Q2026 Global Credit Outlook: Dispersion, not disruption

Key takeaways

• Macro: We believe we are now past the peak headwinds related to trade policy uncertainty, debt service costs, and economic weakness. We see scope for growth to track at a trend pace in 1Q2026, and the labor market to stabilize after a few months of notable weakening. Episodic volatility is likely to remain a persistent theme. In both liquid and private credit, we expect an environment of heightened dispersion, but not widespread market disruption.
• Liquid credit: Spread valuations are tight vs. history, but the bar for a sustained widening is still high, in our view. We continue to prioritize the income and all-in yield aspects of liquid credit (which still screen as compelling vs. history), as opposed to a potential total return ‘boost’ from tighter spreads or materially lower interest rates.
• Private credit: The structural shifts driving private credit’s expanding addressable markets of borrowers and investors remain firmly in place. Dispersion across managers, vintages, and company characteristics (size, sector) will become increasingly evident, in our view.
• Commercial real estate (CRE): The recovery in the CRE market has been slow, but steady. We expect this to extend in 2026, driven by an ongoing rebound in transaction volumes, as buyer and seller expectations move into better alignment. Similar to the credit market backdrop, dispersion is also a prominent theme.
• Risks to our view: A sharp downturn in global growth and severe deterioration in corporate profit margins are the key downside risks, as this could fuel additional deterioration in the labor market. Upside risks include an above-trend pace of economic activity, bolstered by a combination of resilient consumer spending and business investment.