While numerous indicators suggest an imminent economic downturn and the resulting market implications, there are reasons for cautious optimism. Cheap and plentiful debt has been the oxygen of the high-yield (HY) bond and leveraged loan markets over the past decade, underpinning a benign environment for merger and acquisition (M&A) and buyout activity.
Since February 2022, galloping inflation, rapidly rising interest rates and the threat of recession have combined to reverse these favourable dynamics, with equity markets in freefall and bond yields rising steeply.
