Introduces KKR's 2026 outlook calling for high-grading portfolios at low cost, and asks Henry McVey to explain.
Speaker1
Henry McVey
Markets have had a huge 3-year run with multiple expansion and tight credit spreads. Investors should move up in quality given low upgrade cost and ample liquidity.
Henry McVey
Equity gains concentrated in 7 stocks/3 sectors. Expect broadening to Japan, Europe, and other US sectors, aided by potential Trump stimulus helping cyclicals.
Asks if he still owns MAG-7 and if diversification implies trouble ahead.
Speaker1
Henry McVey
For those who can't invest privately, should start to diversify because valuations and growth in other sectors are picking up.
Questions accuracy of private credit/equity marks versus public market marks.
Speaker1
Henry McVey
Disagrees with perception; valuations are third-party. Credit cycle in 2021 saw excessive deployment creating concentration risk. Credit defaults need to normalize from ~1% to nearly double.
Henry McVey
Big tech companies' revenue per employee rising sharply, small companies' falling. Post-COVID automation/digitalization (like early 90s internet) is driving US productivity surge (~5%).
Henry McVey
Market value will shift from AI enablers to companies that apply AI across their business, similar to post-1997 Amazon era.
Henry McVey
Law of large numbers and capex spend will lead to a shift in capital flows.