The Big Picture 2025: Public and Private Markets

As we enter 2025, the relationship between public and private markets is evolving, presenting both challenges and opportunities for investors. The private credit market is approaching $2 trillion, but its rapid growth is facing pressures from narrowing credit spreads and increased competition from banks.

In 2024, bond issuance experienced significant growth, driven by strong demand from credit investors. Credit spreads are at their narrowest levels in history, indicating a lower perception of risk in the market. Additionally, credit events in the credit default swap (CDS) market have remained low, which is a positive sign compared to the volatility experienced in previous years.

Private equity sentiment is also on the rise. The Private Equity Sentiment Index has increased by 40% from Q1 2022 to Q1 2024, suggesting a more favorable outlook among investors. Furthermore, there has been a notable decline in mentions of volatility during earnings calls, reflecting growing confidence in the market.

Easing monetary policies worldwide are expected to benefit debt issuers in public credit markets. As public and private markets continue to converge, it is crucial for investors to remain informed and flexible to capitalize on emerging opportunities. There is also a growing demand for greater transparency in the largely unregulated private credit space, making it essential for investors to stay aware of regulatory changes.