Dispersion

Summary

• U.S. GDP growth recorded an annual rate of 4.4% in the third quarter of 2025.
• Aggregate consumption relies heavily on high-income households, while low-income consumer spending has declined.
• Low-income household salary growth slowed to 1.4% year-over-year compared to 4.0% for high-income households.
• High-income consumers increased spending on clothing \& airlines, whereas low-income consumers reduced expenditure in these categories.
• Hyperscalers' capital expenditure reached approximately $400 billion in 2025 amid an AI investment race.
• The S&P 500 returned 16% in 2025, marking its third consecutive year of double-digit gains.
• AI-related stocks drove three-quarters of the S&P 500's return since the 2022 launch of ChatGPT.
• The 10 largest companies represent nearly 40% of the S&P 500 index.
• The S&P 500 Information Technology index posted a three-year annualized return of 33.8%, while Consumer Staples returned 6.5%, Energy returned 1.8%, \& Real Estate returned 1.9%.
• Senior loans currently offer a yield of 7.9%, BB-rated loans yield 5.7%, \& CCC-rated loans yield 16.1%.
• Over 40% of CCC-rated high yield bond market value trades within a 400 basis point spread, while 12% trades at over 1500 basis points.
• The recovery rate on first-lien loans stands at 37.7%, below the 25-year average of 62.3%.
• 40% of CCC-rated borrowers have operating cash flow coverage below 1.0x.
• Private credit EBITDA growth exceeded 8% year-over-year in the third quarter of 2025.
• Roughly 20% of private loans have payment-in-kind optionality, with over half utilizing the option.
• Instances of payment-in-kind emerging after deal origination due to borrower stress represent 4-5% of private loans.
• Nearly $55 billion of investment grade debt was downgraded to high yield in 2025.
• Barclays predicts $70-90 billion of investment grade debt will be downgraded to high yield in 2026.
• Investment grade bond issuance totaled $1.7 trillion in 2025, with $338.7 billion issued in the fourth quarter.
• High yield bond defaults were 1.9% in the U.S. \& 0.7% in Europe over the last twelve months.
• Senior loan defaults were 2.9% in the U.S. \& 2.2% in Europe over the last twelve months.
• Emerging Markets corporate debt defaults were 3.0% over the last twelve months.
• Global Convertible bond issuance reached $166 billion in 2025.
• Commercial real estate CMBS defaults were 7.3% over the last twelve months.
• Private-label CMBS issuance reached approximately $158.0 billion in 2025, a 39.6% increase year-over-year.
• Direct lending deals command a roughly 100 basis point premium over new-issue broadly syndicated loans of similar quality.
• The yield curve shifted from inversion to a steepening of 65-70 basis points in favor of long-dated treasuries.