Marathon CEO: Credit Markets Thriving Despite Market Shifts

In Brief:

Bruce Richards, Chair and CEO of Marathon Asset Management, shared his market outlook on "Bloomberg The Close," arguing that credit markets remain remarkably stable despite recent equity volatility. Richards highlighted a significant investor rotation away from equities, particularly growth stocks, into credit instruments where his firm is successfully deploying capital at approximately 12% returns. He predicts US economic growth will slow to 1-1.5% due to tariffs and reduced government spending, creating what he calls "the golden era of credit" while equity markets face continued pressure.

Big Picture Drivers:

• Rotation: Investors moving from equities (especially growth) into credit markets

• Stability: Credit markets showing minimal price deterioration despite equity volatility

• Policy impact: Washington's tariffs and spending pullback creating "austerity-like" conditions

• Sector divergence: Significant performance differences across industries require selective approach

Key Topics:

• Credit markets: High stability with minimal spread widening despite equity volatility

• Economic outlook: Growth projections reduced from 2-2.1% to 1-1.5% range

• Fed policy: No immediate easing expected with inflation still "too firm"

• Investment opportunities: Selective sector positioning critical for returns

Key Insights:

• Credit resilience: High-yield spreads widened only 50 basis points while prices remained stable

• No "Fed put": Markets won't see central bank intervention at just 10% equity correction

• Private credit boom: Capital deployment opportunities with 12% returns available

• Sector selection: Pharmaceutical companies offer value while autos face downgrades

Memorable Quotes:

• "Credit markets are behaving really, really well. The credit markets are incredibly stable... price hasn't moved either for loans or bonds in any kind of meaningful way."

• "What's happening right now is policy measures coming out of Washington... is going to result in the economy growing not at 2% or 2.1%... but growing more like 1 to 1.5% because it's going to feel like austerity."

• "As long as the economy grows at 1%, credit markets are dancing and singing having a great time. Meanwhile, equity markets are suffering."

The Wrap: 

Richards presents a compelling case for credit investments amid broader market uncertainty. His emphasis on sector selection rather than broad market bets suggests investors need targeted strategies to navigate the current environment. While advocating for credit exposure, Richards remains selective - favoring secured consumer loans over unsecured debt and embracing specific pharma opportunities while warning about challenges in automotive, airlines, and homebuilding sectors.