Summary

• AI-driven spending is benefiting stocks more than bonds: Equity investors are leaning into growth from AI investments, while credit markets are demanding more compensation for rising leverage and uncertainty.
• Not all credit is equal: Software and private-equity-backed borrowers are under more pressure, highlighting the need for careful issuer selection in below-investment-grade portfolios.
• Senior structured credit remains resilient – for now: High quality exposures such as AAA rated collateralized loan obligations (CLOs) continue to hold up, supported by diversification and their position in the capital structure, but would be tested in the unlikely event of a severe downturn.

AI-driven capex is widening the gap between opportunity in equities and risk in credit.

Hyperscalers: Volatility helps the call and hurts the put

Fifty-two years ago, economist and future Nobel laureate Bob Merton published a

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