Profiles in Credit - The Annual Sit Down with Callum Thomas - 2025

Yeah, so I think probably the first thing is just to kind of define it.

And the reason why I say re-exceleration is because we kind of went through a couple of years of economic angst of basically the 2022, 23, and even 24, where in the aggregate and at the global level, you know if you just looked at the aggregate demand gdp numbers it probably looked fine but under the surface there's a lot of um you know i would call them mini recessions or or near-miss recessions um and definitely weak spots a lot of people talk about it as a k-shaped economy and um and i think really what the the key point is that it's about okay We had what was as close as you can get to a recession without calling it a recession.

And if it was a recession, we'd be calling it a recovery.

But since it wasn't, we'll be calling it re-acceleration.

And the things behind it, the main tailwind or the main driver really is the monetary policy side of things.

If you recall back in 21, 22, we had this basically panic rush to rate hikes, really kind of a procession of policy mistakes ever since the pandemic.

But the key point is that we saw this big shift to rate cuts easing in 2024, and then Earlier this year, if you remember all the way back to April, we had this sort of crazy moment in the world and we all panicked and then we kind of stopped panicking with tariff risk on, tariff risk off and all the rest of it.

But the one good thing that came from that, at least from a... economic outlook or market outlook standpoint is that it spooked a lot of policymakers into doing a lot more easing than they might have otherwise and so The long story short is that you've got a whole lot of monetary tailwinds behind the global economy heading into next year.

You've got also fiscal easing measures, quite a number of geographies easing things on the fiscal front.

And then also just the stage of the cycle for a lot of the big moving parts of the global economy.

So Europe is turning up out of a slowdown.

Japan is, you know, they're already accelerating.

And China's kind of, in the basing process as well.

And then just to kind of capture that or summarize that is the global manufacturing PMI after going through what would normally be called recessionary levels for the last couple of years are turning up quite significantly now.

And it's my favorite leading indicator chart of monetary policy actions versus the PMIs.

And they're pointing to You know, some high 50s, maybe even 60-point readings, which would be a strong expansion heading into next year.

So, yeah, an interesting concept and definitely a bit other than what some people are talking about.

But I think there is potentially nuance to that.

I mean, I guess maybe to summarize, it would be a kind of a global version of don't fight the Fed.

Yeah, exactly.

But yeah, I think where you could still, if you wanted to be pessimistic, is maybe US goes for a bit of a soft patch and you might say, well, that's rather inconsistent.

You know, how could you be talking about a global growth re-acceleration without the US? And I think that would be I think plausible and definitely a sight to behold in terms of its impact for markets.

Yeah, certainly that's not something that you associate with a kind of a global acceleration.

But I guess, you know, I kind of think I look back to 2002 to 2007, which was a similar period, I guess, where the U.S. underdid the rest of the world.

I don't know if they're the same kind of, you know, kind of macro circumstances at the time.