Ken Fisher: Private Credit and the Next Bear Market

Ken Fisher discusses the relationship between private credit concerns and potential bear markets or recessions. He establishes that surprise is the key factor that moves markets most significantly. Fisher acknowledges that private credit has been extensively discussed as a potential problem, but argues this widespread discussion actually mitigates its risk as a market catalyst. He explains that because many people talk about private credit issues, these concerns have already been priced into the market, reducing their capacity to cause a major shock.

Fisher distinguishes between private credit's role as a contributor versus a cause. He notes that while private credit won't be causal to a recession, it will certainly be affected during a business cycle recession. When recessions occur, companies issued private credit that cannot pay off their debts will face defaults, and private credit will be hit alongside public credit. However, Fisher emphasizes this would not be surprising—it would simply be a normal, expected part of business cycle dynamics.

The speaker's core thesis is that true bear markets and recessions are typically caused by factors that are powerful, capable of significantly reducing GDP, but have not been noticed or pre-priced by the market. Private credit fails this test because its risks have been widely discussed and analyzed. Fisher concludes that private credit's prominent role in market discussions places it in a reactive category rather than a causal one—it will be affected by recessions but won't be the trigger that initiates them.