Market Conditions are Ripe for Private Credit

July 7, 20225 min read
Market Conditions are Ripe for Private Credit
Share on facebookShare on TwitterShare on Linkedin

Key takeways

  • An improvement in food and energy inflation, the reduction of China’s mandatory quarantine for travelers, as well as less elevated valuations for public equities are lifting up investor sentiment, at least partially.
  • While timing markets is a fool’s errand, and it is close to impossible to say if US equities have bottomed, we believe market conditions have at least stopped deteriorating, which may point to flat returns for the next few months.
  • In the context of a “fat and flat” equity market, private market investments – especially private credit, as yields appear in our view to have stabilized – can potentially provide positive returns.

In mid-June, markets were shaken – but also somewhat reassured – by the Federal Reserve’s decision to raise interest rates by 75 basis points, more than previously expected, in response to CPI inflation overshooting expectations.

The move generated some confusion among investors, as the Fed’s frontloading of rate hikes was broadly seen as more likely to cause a hard landing – a more pronounced economic slowdown, or potentially a recession. That would, in turn, potentially trigger a pause or a slowdown in the Fed’s rates normalization path going forward.

Inflation and recession usually have opposite effects – the former tends to push long-term interest rates up, the latter down – and they cannot coexist unless the expectation is for a period of stagflation, during which high rates of (mostly supply-side) inflation persist in a stagnant economy. While some analysts still expect a stagflation, others are less pessimistic as circumstances are very different compared to the 1970s.

(Marginally) improving sentiment, finally

While some of the month-end equity market moves may be technical – related to rebalancing – a marginal shift in market sentiment has already happened last week. We would not go as far as to say that public markets have bottomed, but some positive catalysts – China’s reduced travel quarantine, some respite in food and energy inflation – have emerged alongside more reasonable valuations that may have started to look attractive to some buyers.

We are tentatively optimistic that the big selloff is behind us, and believe the next few months will feature a “fat and flat” market. Several indicators point in that direction, in our view.

For once, some food inflation has subsided, or is likely to do so as crops appear likely to replenish food reserves that had been suffering since the Russia-Ukraine war started. In addition, China reduced quarantine times for inbound travelers, while its equity market is now a positive performer this year – mostly due to the end of politically-driven tech bashing. While economic fundamentals in China may remain shaky and we believe the country has not yet dealt with its structural issues, these marginal improvements have contributed to removing some uncertainty.

At the same time, US exceptionalism continues to be a dominating theme. We think the US is still very well placed to attract investments – as it is likely to be the first economy to go through a slowdown, with the potential for an equity market rebound as it usually happens during recessions. As both Europe and China – two export-oriented economies – are more dependent on global growth, they are – in our view – going to be slower to recover. Europe in particular is still grappling with the energy shock caused by the Russia-Ukraine war, and by the European Central Bank’s (ECB) conundrum – as policymakers are forced to raise rates, but have to do so while trying to limit the widening of peripheral spread, a monumental task from both a policy and a legal perspective.

Further down the road, we believe 2-year rates – now hovering around 3.5% – are underpricing the risk of a recession/economic slowdown. Indeed, the increasing likelihood of a slowdown or of a recession is likely to force a Fed pause, which would then point to a lower neutral rate. A recent tweet by hedge fund manager Michael Burry, suggesting retailers have been building up excess inventories, which will have to be corrected via lower retail prices soon, has caught some attention. Commodities are also on a slight downward trend – the Bloomberg commodity index is down 10% since June 9. The June CPI reading – to be released on July 13 – will give some more clarity as to where we are heading, but our expectation is that inflation is likely to decrease compared to the May reading.

Fat and flat can make private credit shine

We believe markets are likely to have priced in all existing negative news, and that further negative surprises are unlikely in the near future as things stand. Inflation seems to have at the very least peaked, and even if it does not subside as swiftly as we expect, it is likely to do so eventually.

On the other hand, there do not seem to be positive catalysts down the road that suggest a potential radical shift in market sentiment, which suggests to us that equities are likely to continue to tread water in the short term. Importantly, we still have to go through a potentially mediocre earnings season. Potential positive game changers could be a negotiated end to the war in Ukraine, which we believe is the only way to end the war, inflation decreasing faster than expected – proving its temporary nature – and the end of global supply chain woes.

We believe tech stocks, which happen to be more sensitive to higher rates and had experienced record inflows due to increased demand from retail investors during the heights of the pandemic, are unlikely to recover their recent losses, and may continue to trade at these levels that reflect less abnormal valuations. And as commodity prices stabilize, the recent rally in commodity-related equities appeared – in our view – to have run its course.

Instead, in this fat and flat environment, investor attention should be focused on alternative investment opportunities that can provide positive returns – with private credit opportunities at the forefront.

“Private credit” identifies lending opportunities beyond public fixed income or commercial bank lending that are focused on customized, privately-negotiated debt transactions between a borrower and a lender. These deals provide flexibility as they are negotiated ad hoc, and can offer some protection from market risk, as well as potentially higher returns.

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

300 Park Avenue 15th Floor, New York, NY 10022


No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

Yieldstreet is not a bank. Certain services are offered through Plaid, and Footprint and none of such entities is affiliated with Yieldstreet. By using the services offered by any of these entities you acknowledge and accept their respective disclosures and agreements, as applicable.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure