Our last Market Now series came in March 2022 [link] after Covid had peaked and begun to fade, when Russia invaded Ukraine. This week we think another pause to review conditions is appropriate given a number of dynamics at play.

First, the Fed has paused in its rate hikes as their gravity seems to have pulled many inflation indicators down. Employment remains tight, but shows signs of loosening. Real GDP rose at a healthy 2.4% pace for 2Q, yet real personal consumption decreased from 4.2% in the first quarter to 1.6% (see our Chart of the Week).

Public equity markets have responded in a buoyant fashion with the S&P 500 and DJIA up 18% and 7% for the year, respectively. Even the ten-year Treasury bond, in a year of rising rates, has eked out a 0.28% return.

The high-yield credit markets, while not exactly houses a-fire, are showing some signs of life. Total leveraged volume at $233 billion (per Pitchbook LCD) is off 6% from 2022’s $249 billion, though first-lien TL activity was down more precipitously ($130 billion vs. $177 billion). Bond issuance made up the difference, improving from $70 billion to $100 billion, year over year.