Recession Fears Took a Back Seat

IACPM Outlook for Credit Spreads Changes Most in Nearly Four Years; Latest Survey Forecasts Almost No Change in Spreads as Recession Fears Ebb; Longer Term Defaults Still Pose Risk

     New York, NY – Recession fears took a back seat in the latest IACPM Credit Outlook Survey, as survey respondents changed their credit spread outlook by the largest amount in nearly four years. The latest quarterly spread index reading is a virtually neutral -3.3, compared to the previous quarterly index score of minus -38.4. The last time survey results changed this much quarter-to-quarter was June 2015, when the spread outlook index dropped from a positive 1.8 to minus -45.2, amid the Greek financial crisis.

Driving the improved outlook this quarter is largely the US Federal Reserve’s decision to leave interest rates unchanged. There are other challenges to the global financial markets to be sure but, for the moment at least, recession fears have taken a back seat.

“Where we are now at the beginning of the second quarter is a sea change from the end of last year,” commented Som-lok Leung, Executive Director of the International Association of Credit Portfolio Managers, or IACPM. “A number of economic data remain poor, for example, in Europe, but the general sense is central banks will be supportive and keep economies moving forward.”

Perhaps the biggest question is how long economic growth can continue. While a large majority of survey respondents believe recession is on hold at least for now, there is a difference of opinion as to whether the reprieve is temporary and whether it will last for a much longer period.

Even the most optimistic respondents concede, though, the current economic cycle is long in the tooth and would normally be expected to recede into recession. Further, a majority of respondents expect credit defaults to increase globally over the next 12 months. The latest Aggregate Credit Default Index is a solidly minus -55.7. There are also no shortages of challenges, including potential trade tariffs and the still unresolved Brexit negotiations.

“As hard as it is to imagine after the turmoil at the end of last year and the point where we are in the economic cycle, there is genuine debate over whether recession has been pushed back for a substantial period of time,” noted Mr. Leung. “Some people look at the current challenges and point out we have survived a number of them over the last ten years and feel there is a decent chance we will muddle through the next ones as well.”

The Credit Outlook Survey is conducted among members of the IACPM, an association of more than 100 financial institutions in over 20 countries around the world. Members include portfolio managers at many of the world’s largest commercial banks, investment banks and insurance companies, as well as a number of asset managers. Members are surveyed at the beginning of each quarter.

Survey results are calculated as diffusion indexes, which show positive and negative values ranging from 100 to minus -100, as well as no change which is in the middle of the scale and is recorded as “0.0.” Positive numbers signify an expectation for improved credit conditions, specifically fewer defaults and narrower spreads, while negative numbers indicate an expectation of deterioration with higher defaults and wider spreads.

Please click here> to access a selection of aggregate survey data.

The full aggregated survey results will be published with a 6 months time lag in the members only section of our website. Please click here> to access prior quarters’ survey results.


The IACPM, with over 100 member institutions located in 20 countries, is a professional association dedicated to the advancement of credit portfolio management. The organization’s programs of meetings, studies, research and collaboration are designed to increase awareness of the value and the function of credit portfolio management among financial markets worldwide, and to discuss and resolve issues of common interest to its members.