The more things change, the more they stay the same. Outside of the largely duration-driven (for now) investment grade fixed income markets, the environment for credit and credit alternatives remains attractive, albeit complex. (i.e., return exceeding the risk-free rate). For traditional high yield and bank loans, the strength of corporate profits and resiliency of the economy anchors a favorable fundamental outlook. If 2025 mirrors 2024 in that the health of the economy remains the prevailing driver of returns in credit, investors should achieve the targeted excess yield in these non-investment grade securities.

Now that President Trump has taken office, investors are sharpening their focus on the administration’s proposed fiscal, immigration, regulatory, and trade policies. We shared our initial thoughts on likely shifts in policy in our Post-Election Economic and Market Outlook back in November. While it remains challenging to predict outcomes given razor-thin congressional margins, we offer this update (as of January 14) on the evolving policy landscape and its potential impact on both the real economy and the markets during 2025 and into 2026.

Markets have seen tremendous change over the last few decades. Twenty-eight years ago, there were over 8,000 U.S. public companies. That number subsequently dropped to less than 5,000. There was also a sharp decline in the number of IPOs, which dropped by over 60% since the 1980 to 2000 period[1]. Meanwhile, the number of private companies increased significantly. Credit markets have also evolved. Private credit has grown from a nascent industry to a $1.6 trillion market in roughly 15 years, surpassing the size of the high yield debt market. Given the significance of these changes, the natural question is, “why?”