Veteran strategist Larry McDonald warned a credit downturn is underway globally.
Equity markets mask rising stress as investors approach 2026.
He said.
McDonald highlighted divergence between buoyant stocks and credit markets repricing risk.
He cited turmoil in private credit and structured lending segments markets.
A First Brands debtor in possession loan collapse signalled failed underwriting.
The credit crisis has already started beneath calm equities.
McDonald said.
Coreweave bond yields near twelve percent worried credit focused investors globally.
He argued artificial intelligence infrastructure faces cash flow pressures mounting risks.
Equity traders remain optimistic despite tightening funding conditions and delays ahead.
Private credit liquidity promises pose systemic dangers once redemptions accelerate sharply.
McDonald warned quarterly liquidity mismatches echo dynamics seen before crises historically.
He expects forced markdowns could amplify losses across interconnected credit markets.
Attention is shifting toward potential capital rotation during 2026 market cycles.
McDonald noted Nasdaq valuations leave smaller sectors sensitive to reallocations ahead.
He favours hard assets like energy copper coal infrastructure equities globally.
These areas support power grids data centres and industrial expansion demands.
Policy accommodation and political shifts may sustain liquidity pressures globally ahead.
McDonald said inflation tolerance strengthens the long term real asset case.
He acknowledged shocks could briefly lift correlations across markets worldwide temporarily.
Central bank intervention would likely follow reinforcing hard asset appeal thereafter.
McDonald said credit markets are delivering warnings before equities react fully.
His message stressed vigilance as calm valuations hide deepening credit strains.