Massive AI and cloud infrastructure spending by tech giants is flooding the market with new debt. For the first time since the 2008 crisis, this oversupply, not macroeconomic fears, is becoming a primary driver of market volatility and repricing risk for existing corporate bonds.

A surge in corporate spending on AI, capex, and M&A can boost stock prices. However, this same activity often requires issuing large amounts of new debt, increasing supply and causing credit spreads to widen, leading to underperformance versus equities.

Massive investment requires issuing assets (bonds, equity), creating supply pressure that pushes prices down. The resulting spending stimulates the real economy, but this happens with a lag. Investors are in the painful phase where supply is high but growth benefits haven't yet materialized.

High dilution costs and a focus on narrative-driven stocks (AI, crypto) make public markets unattractive for traditional businesses. These companies now favor private credit for growth capital, creating a bifurcation where public markets are dominated by speculative assets while real economic value stays private.

For the past decade, the Fed was the primary driver of liquidity. Now, the focus shifts to commercial banks' willingness and ability to create credit to fund major initiatives like AI and onshoring. Investors fixated on Fed policy are missing this crucial transition.

Instead of treating private credit creation as a black box, analyze it by tracking corporate bond issuance in real-time and observing whether the market is rewarding high-debt companies over quality names. A rally in riskier firms signals a positive credit impulse.

Historically, lower-quality credit cycles involved periods of high returns followed by giving all the gains back in a downturn. Post-GFC, the absence of a sustained recession has allowed private credit to outperform high-quality bonds by 7% annually without the typical "give it all back" phase, masking latent risks.

Unlike the 2008 crisis, which was concentrated in housing and banking, today's risk is an 'everything bubble.' A decade of cheap money has simultaneously inflated stocks, real estate, crypto, and even collectibles, meaning a collapse would be far broader and more contagious.

In the post-zero-interest-rate era, the “everything rally” driven by liquidity is over. Higher base rates mean companies must demonstrate fundamental strength, not just ride a market wave. This environment rewards active managers who can perform deep credit selection, as weaker credits no longer outperform by default.