In the first three months of 2023, 46% of US banks tightened lending standards, according to a 2023 Federal Reserve survey of bank loan officers. Similarly, credit is tightening in Europe, reaching levels not seen in a decade, while in Asia only Australia is rapidly increasing rates.
While not as severe as feared, this credit squeeze nonetheless showed the effect of interest rate rises and bank failures. Yet, what’s a credit squeeze for some is always an opportunity for others. As global central banks have rapidly hiked interest rates to quell inflation, so the wave of bank failures that started with Silicon Valley Bank has further curtailed credit.
As this happens, a shortage of capital and flight from risk is already leading to higher returns in some areas of the markets. Whether in private credit, real estate or the secondaries markets, yields are increasing while some assets are trading at substantial discounts. It’s a buyer’s market for savvy, specialist investors.
In this white paper, PGIM explore how investors have the opportunity to benefit from this uncertainty.
References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.
The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.
Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.
For compliance use only 2970580