This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

And just like that, everyone is a recession expert.

Two weeks ago, most self-proclaimed finance experts hadn’t uttered the word recession since it was fashionable in late 2022/early 2023.

From late July to early August, the prevailing sentiment of those seemingly in the know was 1) Nvidia (NVDA) shares were due for another 50% move after earnings on Aug. 28; 2) a 10% year-end rally for the S&P 500; and 3) a 100% move in Nvidia’s stock price in 2025.

Yet here we are, with the pros scaring the heck out of everyone the past week on the potential for a recession after a “bad” jobs report last Friday. Two top Wall Street banks raised their recession probabilities this week, for example.

These pros have voiced their concerns on TV, social media, and in research reports, but they also conveyed them to global trading desks. Markets were pushed into choppy seas as crowded AI trades such as AMD (AMD) have been dumped, with no nod to their underlying fundamentals.

All this recession talk feels like BS to me, an excuse to shake out the average investor so institutional players could get back into high-flying names at cheaper prices. Everyone does know that a recession often means negative economic growth, right? Or a significant slowdown in the economy that lasts quarters or even years?

So the US economy is going to go from 2.8% second quarter GDP growth and a long period of steady expansion to slightly negative growth or worse sometime within the next six months? An economy still creating a good clip of jobs each month is going to begin producing job losses in the near future?

Where is the evidence to support this? What’s the trigger for it? Don’t hit me up on X, formerly Twitter, and say it’s interest rates because the economy has been doing just fine during this high rate period.

Lost in recession BS this week was an ISM services report, which includes data on business activity, new orders, employment, and supplier deliveries. The index clocked in at 51.4%, up from 48.8% in June.

Numbers over 50% are seen as positive for the economy. Most companies in the report said business was either flat or expanding gradually.

Then, initial jobless claims totaled a seasonally adjusted 233,000 for the week — a drop of 17,000. The Street was looking for a print of around 240,000.

Corporate earnings season has gone quite well too. The majority of well-known public companies are easily beating sales and profit forecasts, not shocking the masses with giant misses. Outlooks have been solid.

Story continues

That’s recessionary? Come on!

Now, I am not going to sit here and blow smoke and say everything is peachy. Many households are struggling to make ends meet because of sticky inflation, something I was reminded of when chatting with P&G’s (PG) CEO Jon Moeller a week ago.

I think the interview by Yahoo Finance’s Brooke DiPalma at the NYSE with Dine Brands (DIN) CEO John Peyton was also eye-opening on this front.

“It’s a value war. It’s a fight for share of wallet. … At a time when our target guest is dining out less, we have to make sure that when they do choose to dine out — IHOP or Applebee’s or Fuzzy’s are their first choice,” Peyton said.

The same goes for DiPalma’s exclusive interview with Molson Coors (TAP) CEO Gavin Hattersley.

“Consumers [are] making different pack sizes choices,” Hattersley said. He said this behavior has been going on “for a while” and is “pretty consistent through through Q2.”

Conversations I had this past week with top leaders further shed light on these macro challenges.

Disney (DIS) CFO Hugh Johnston told me demand at its theme parks tailed off in the final few weeks of the quarter. The company sees this slowdown persisting for the next few quarters.

“We certainly see consumers behaving in a way — I wouldn’t call it recessionary necessarily — they’re watching their pennies a little bit more,” Johnston said. Lost in the sauce, though, was a strong quarter for Disney’s streaming businesses. In a recession, people usually cut unnecessary expenses.

Ralph Lauren (RL) CEO Patrice Louvet told me (video above) this when I asked him if the consumer is behaving recessionary: “I think it’s pretty clear wherever you look that the overall consumer is being pressured by the cumulative effect of inflationary pressures and interest rates. As far as our core consumer is concerned, we actually find them to be very resilient.”

The company still notched sales growth in its North American stores.

All in all, you don’t get the sense the economy has already jumped over a cliff and is falling to the ground. As a result, it’s hard to justify some of these severe down days we have witnessed in markets this week.

What appears to be unfolding is a gradual cooling in the economy that could prove short-lived, especially if the Fed cuts rates, as Cognizant (CTSH) CEO Ravi Kumar told me on my Opening Bid podcast this week.

Labor market developments of late “seem more consistent with post-reopening normalization and gradual rates drag than any current shock or accelerating weakness but the risk is present,” said 22V Research strategist Peter Williams in a note this week.

I think that’s a fair assessment. What’s not fair is all this recession hysteria talk.

Three times each week, I field insight-filled conversations with the biggest names in business and markets on my Opening Bid podcast. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.

In the below Opening Bid episode, Trump’s former nominee to the Federal Reserve Judy Shelton shares why the Fed should be focused on 0% inflation.

Click here for in-depth analysis of the latest stock market news and events moving stock prices

Read the latest financial and business news from Yahoo Finance

(Bloomberg) — The turmoil in global markets this past week is causing private credit funds to question whether they should reconsider the ever-tighter loan margins they’re demanding.

Most Read from Bloomberg

Industry stalwarts such as Ares Management Corp. and Blackstone Inc. have been charging less for private credit for most of this year, according to data compiled by Bloomberg News, as they try to snatch business away from the syndicated loan market. But that strategy may change after recession fears have risen amid a slew of worrying economic reports.

The market turmoil that followed is causing a rethink about “some of the desirability of the spread compression that we’ve seen in the last few months,” David Golub, chief executive officer at Golub Capital BDC Inc., said in an earnings call this week. It “may take some of the steam out of some of the parties that have been most receptive to reducing spreads in the private market.”

The $1.7 trillion private credit industry has grown rapidly in the past few years, as higher rates forced buyout firms to look further afield for funding while traditional lenders pulled back. Banks have become more competitive in recent months as they try to retain leveraged loan market share. In response, credit funds started pushing their pricing down, raising concerns about a potential race to the bottom.

For bigger private credit loans, the interest above benchmarks that lenders demand has fallen by at least 100 basis points, or 1 percentage point, since the start of last year, according to a Bloomberg analysis.

For example, the private credit loan helping to fund Genstar Capital’s purchase of a stake of payment processor AffiniPay came in at 4.75 percentage points over the Secured Overnight Financing Rate.

In Europe, a deal for Iris Software had portions that priced at 5 percentage points over the Sterling Overnight Index Average and 4.75 percentage points over the Secured Overnight Financing Rate. Last year, margins were more typically at least 575 basis points.

“If the data starts to present a clearer hard landing expectation,” then “we are going to have the opportunity to widen credit spreads,” said Andrew Davies, head of CVC Credit in London, but “we probably need a longer period of volatility to support a significant move wider.”

Story continues

This week’s turbulence did highlight one advantage of private credit for borrowers, however. While the debt is typically more expensive, there is no risk for borrowers that the pricing increases through syndication. A CVC-led consortium opted for private credit this week to help finance its £5.4 billion ($6.9 billion) buyout of Hargreaves Lansdown Plc, an investment platform.

By contrast, loan deals for SeaWorld Parks & Entertainment Inc., SBA Communications Corp. and Focus Financial Partners in the broadly-syndicated market were postponed as the risk premium on junk-rated corporate bonds rose to its highest level since late 2023. Prices on US leveraged loans fell to their lowest level of the year on Aug. 5.

“One of the benefits of private credit, and we’ve seen some deals pulled from the broadly syndicated market this week, just given some of that volatility, is better execution at the end of the day,” Bryan High, who leads the global private finance group at Barings, told analysts on a call this week. “We’ve definitely seen an increase in activity.”

Week in Review

• The week began with a bang that slowly faded into more of a whimper, as spreads on US investment-grade corporate bonds surged to 111 basis points on Monday before settling back down to 103 basis points on Thursday, about 10 basis points above their level on July 29.

  • Bonds broadly gained after a weaker-than-expected jobs report on Aug. 2 raised concerns that the economy was slowing at a faster rate than previously understood, and the Federal Reserve might have to be more aggressive about cutting rates.

  • But corporate bonds had trouble keeping up early in the week, pushing credit spreads wider. Credit markets broadly shut down, with no companies selling debt on Monday in the high-grade US market. Even in the staid world of asset backed securities, T-Mobile US Inc. postponed a sale of more than $500 million in asset backed securities.

  • Later in the week, markets stabilized, helped by a Bank of Japan official signaling it wouldn’t keep hiking rates if markets are unstable. On Wednesday, companies led by Meta Platforms Inc., parent of Facebook, sold about $32 billion of US high-grade corporate bonds. In Europe, a pair of deals hit on on Thursday, effectively reopening that market.

• For riskier borrowers, the turmoil in global markets threatened to end a summer debt boom that helped some of the riskiest US companies cut borrowing costs, push out maturities and even defer interest payments.

  • The change in tone was obvious on Monday, when SeaWorld Parks & Entertainment Inc. shelved its planned refinancing of a $1.55 billion term loan, while SBA Communications Corp. postponed the repricing of a $2.3 billion term loan. On Tuesday a $3.65 billion package for Focus Financial Partners was delayed, and market participants expect more lower rated deals will be pulled. In Europe, three days this week saw no bond sales.

  • But in a sign of how fear abated later in the week, six borrowers sold more than $4 billion of bonds in the US junk market on Thursday, the busiest day since May.

• As fear rises of potentially slowing economic growth, creditors’ patience with Europe’s delinquent borrowers is wearing thin, with lenders now more willing to seize the assets of companies that fail to pay their debts.

  • Creditors are currently running a sales process for Hotel Bauer after seizing the Venetian landmark from the ruins of Rene Benko’s Signa empire. Elsewhere, Carlyle Group took over London Southend Airport following a dispute over an alleged breach of the terms of a pandemic-era rescue package. And Oaktree Capital Management won control of Italian football club FC Internazionale Milano after its Chinese owner defaulted on a loan.

• China’s credit market was in some ways insulated from the tumult of the week. A series of Chinese borrowers turned to the lower cost and relatively-stable yuan bond market to get financing, including Pizhou Industrial Investment Holding Group Co., a Chinese local government financing vehicle.

  • ByteDance Ltd., the Chinese owner of TikTok, is preparing to refinance a $5 billion loan by another three years, people familiar with the matter said, in what would be one of the largest such deals for the country’s borrowers this year.

On the Move

• Royal Bank of Canada’s head of US high-yield debt trading Prashant Radhakrishnan has left the firm, according to people familiar with the matter.

• Mizuho Financial Group Inc. has hired two bankers from Barclays Plc for its leveraged finance and financial sponsors teams in the US, people with knowledge of the matter said. George Lee has joined as a managing director in Mizuho’s leveraged finance group. The firm has also hired Corey LoVerme, who will join as a managing director in its financial sponsors group in November after a leave.

• BlueBay Asset Management’s head of European high-yield, Justin Jewell, has left the firm and will join Ninety One Asset Management, according to spokespeople at the two companies.

• LibreMax Capital is hiring Powell Eddins, who headed US asset backed securities and collateralized loan obligation research at Barclays Plc in New York. Eddins joined Barclays in March 2023 after stints at both Credit Suisse and Wells Fargo & Co., according to his LinkedIn profile.

• Leonard Xie has left Citigroup to join Corbin Capital Partners, where he’ll be a quantitative investment analyst focusing on collateralized loan obligation investments across the firm’s credit platform, according to a Corbin spokesperson.

• Kohlberg & Company, a middle market private equity firm, has hired Zach Bahor from Stone Point Capital as a managing director in credit and capital markets.

• Carlyle Group Inc. is hiring Solomon Cole from AllianceBernstein for its private credit platform, according to people with knowledge of the matter.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.

When you switch jobs, the basic advice is to roll over your old employer-sponsored retirement account to an individual retirement account, or IRA. Sounds easy, but beware.

I know because I’ve done this a few times. And have learned to keep it simple.

My method: I divvy my rollover up between a handful of low-fee index funds. I have also carved out a portion for a target-date fund, a “set-it-and-forget-it” way to invest based on the date of retirement. (As you age, the fund shifts the account’s investments from stocks to less volatile choices, such as cash and bonds.)

But guess what?

That’s not what many people do, according to recent research from Vanguard Group. Instead, their money is transferred from a former employer’s 401(k) plan to an IRA, usually at another financial services firm, and the balance goes into a market-type cash account that generally pays a marginal rate of interest.

Nearly a third of those who rolled retirement savings into IRAs at Vanguard in 2015 still had the balance sitting in cash seven years later. Not cool. You lose years of potential gains from being invested in stocks, which compound and boost your wealth for your golden years.

We’re not talking about chump change here. For investors under age 55, the estimated long-term benefit of investing in a target-date fund (versus staying in cash) upon rollover is equivalent to, on average, an increase of at least $130,000 in retirement wealth at age 65, according to Vanguard.

“How many people stayed in cash and for how long far exceeded our expectations,” Andy Reed, Vanguard’s head of investor behavior research and co-author of the study, told me.

Most older investors, however — and/or those with balances exceeding $100,000 — moved out of cash within the first few months after the rollover. Compared to men, women, however, were significantly more likely to remain in cash for years after the rollover.

Read more: What is the retirement age for Social Security, 401(k), and IRA withdrawals?

Options

There are several ways to handle retirement savings when leaving jobs. You can keep your 401(k) balance with your old company, roll the money into a new employer’s 401(k) plan, or move it into an IRA.

The downside to keeping retirement money at a former employer, of course, is that you can’t add any more money to it. And you’re stuck investing only in that specific menu of investments. An IRA will typically offer many more choices.

How it works

When you roll your 401(k) account into an IRA, the company that administers the plan typically liquidates your holdings, then moves the cash into your IRA. But, it doesn’t automatically invest it for you. “We often see people assume their IRA cash will be auto-invested, similar to a workplace plan such as a 401(k),” Rita Assaf, vice president of retirement products at Fidelity Investments, told Yahoo Finance.

Story continues

Put it down to confusion, “not necessarily about investing, but with the mechanics of IRAs,” Reed of Vanguard said. “It’s not that people intentionally want to make this money mistake. This is not deliberate and part of a master plan. It’s out of sight, out of mind.”

‘No idea’

In another survey of over 500 Vanguard IRA clients who completed a rollover in 2023 but were still in cash in June, about two-thirds had no idea how their IRA money was invested.

The remainder said they never got around to investing it, or they didn’t want to risk putting their savings into stocks, or they simply felt overwhelmed by their IRA choices. Reed said: “You can have too much of a good thing when it comes to choice.”

Given all the job changing across all generations in recent years, this mistake is pretty significant, particularly for younger workers. “If you want to have any chance of retiring and living the life you want in retirement, then you’re going to have to have a large portion of your retirement savings allocated to equities to maximize your chance of success,” Reed said.

Have a question about about retirement? Personal finances? Anything career-related? Click here to send Kerry Hannon a note. 

Targets to the rescue

To improve retirement outcomes, you need to stay invested consistently.

One solution: Make it possible for financial services firms to invest rollovers to IRA accounts automatically into a target-date fund or something akin to how many employers now enroll workers automatically into these diversified accounts when they come on board.

Virtually all 401(k) plan sponsors and the majority of state auto-IRA programs use target-date funds when they automatically enroll workers in a retirement plan. Track record: not bad. Vanguard’s Target Retirement Fund 2050 is up 11.4% to date and 10.1% over the past five years.

This way you don’t have to know what an index fund or the other nitty-gritty of investment lingo.

Until the laws are changed, your best move is to have a plan for how you want your savings invested before you initiate a rollover, said Lindsay Theodore, a senior manager in advisory services at T. Rowe Price.

Call the firm where you’re moving your money to and get an idea of what would be an appropriate investment, she added. “Having a good understanding up front as to what that process is going to look like can help you get your money invested right away, so it doesn’t get stuck in a cash limbo.”

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.

Click here for the latest personal finance news to help you with investing, paying off debt, buying a home, retirement, and more

Read the latest financial and business news from Yahoo Finance