Cresset refers to Cresset Capital Management and all of its subsidiaries and affiliates. Cresset Asset Management, LLC, also conducting advisory business under the name of TRUE Cresset Sports and Entertainment, provides investment advisory, family office, and other services to individuals, families, and institutional clients. Cresset Partners, LLC, provides investment advisory services strictly to investment vehicles investing in private equity, real estate and other investment opportunities. Cresset Asset Management, LLC, and Cresset Partners, LLC, are SEC registered investment advisors.
Credit Conditions and Risk Taking
The availability of credit, to borrow, spend or invest, is the lifeblood of the financial market. That’s why credit conditions are a good indicator of risk appetite. The easiest way to gauge real time credit conditions is by observing the yield differential between 10-year, BBB bonds and 10-year Treasury notes. Since the bond market is roughly seven times the size of the stock market, the yield premium lenders require to extend credit to lower-quality borrowers is a useful barometer.
Rising credit spreads can also be early warning indicators of trouble. Our credit spread model broke out in Q4/2007, four quarters – an entire year – before trouble swept through the broader markets. While credit conditions are favorable today, spreads have widened in recent weeks and are currently situated just below their 200-day moving average. Continued widening would be a risk-off signal.
Favorable credit conditions along with a favorable economic backdrop, reasonable equity market valuations and positive momentum are keeping us engaged in equity risk-taking. That could change should credit conditions deteriorate.
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About Cresset
Cresset is an independent, award-winning multi-family office and private investment firm with more than $45 billion in assets under management (as of 04/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.
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