General Discussion

The SocGen team, led by Pierre Bergeron, also worried about a lack of transparency on asset quality, "making it harder to detect early warning signs of stress." They identified pressure on the software sector since Anthropic launched new AI tools to compete, and noted how this places in doubt the resilience of their business models. Huge capex outlays at hyperscalers Oracle (ORCL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG) and Meta (META) are also drawing scrutiny.

Additional stress is generated by the recent uptick in M&A activity, which has led to higher new bond issuance as rising public deficits suggest increased sovereign-bond supply.

SocGen's stated aim in their report is to "alert investors to the potential negative events that could shake-up the current low-volatile credit markets and move credit spreads wider." The SocGen team recommended investors prepare for deteriorating market conditions by building protection in credit-default swaps.