[Economics] ‘Economy Is Doing Better Than People Expected,’ Oak Hill’s August Says

[-_-Moltres-_-]

 

Welcome to the Wall Street Week newsletter, giving you investing food for thought from our conversations on Bloomberg Television with some of the best minds on Global Wall Street. I'm David Westin, and this week we talked with Glenn August of Oak Hill Advisors about credit market reaction to interest rate policy and Niall Ferguson of the Hoover Institution about Cold War II with China and the risk of a declining world po[CENSORED]tion. If you're not yet a subscriber, sign up here for this newsletter and for daily markets analysis from Bloomberg Surveillance. One might have thought that 500 basis points of interest-rate hikes would damp the markets a bit. But right now, it’s hard to tell, and Glenn August, founder and CEO of Oak Hill Advisors, said that’s in part because of how well the economy is doing. Six months ago, he talked with us about some $1 trillion of potentially troubled refinancing, but since then “the cost of financing has come down 50 basis points.” Why? A limited supply of new deals means less demand for credit, he said. In addition, “there’s more equity in deals than there’s ever been.” All of which has led to “the market basically extending maturities as opposed to debt getting paid down.” So given the strength in the market, why did Jamie Dimon warn this week that there could be “hell to pay” in private credit? August said it’s always important to pay attention to Dimon, but the JPMorgan CEO was probably focused on some selective “aggressive underwriting.”Six years ago, Niall Ferguson of the Hoover Institution coined the term “Cold War II” to describe the West’s relations with China, and since then others have embraced the name. This version is different because there is an “intertwining of economies that really wasn’t a feature of Cold War I,” said Ferguson, who is also a Bloomberg Opinion columnist. At the same time, a military showdown with China would be extraordinarily dangerous, so it makes sense that the US is “pursuing a primarily economic or technological containment strategy.”

https://www.bloomberg.com/news/newsletters/2024-06-01/us-economic-strength-defies-expectations-oak-hill-s-august-says