Credit market is not signaling all is well, says Sycamore's Mark Okada

Summary

Mark Okada of Sycamore Tree Capital Partners says the economic backdrop looks bullish, but the credit market is already in a cycle. He sees stress beneath the surface, especially in deep sub-investment-grade credit and rapidly grown private credit, where below-investment-grade lending is starting to produce losers. He warns there is no easy button in credit and that investors should be selective rather than reaching for yield.

• Mark Okada remains constructive on the economy but cautious on credit.
• He says credit returns looked fine on the surface but the credit cycle has already started.
• He flags a growing divergence between high-quality credit and lower-quality/CCC credit.
• He warns private credit has grown fastest and much lending is below investment grade.
• He expects a traditional credit cycle with winners and losers, and losers hit harder than historically.
• He says there is no easy button in credit, implying selectivity over broad risk exposure.