What are the key takeaways from this All the Credit episode?

Key insights include: **Fiscal Trajectory Risk:** US debt-to-GDP ratio hits 100%, heading to 130% by decade's end with 7-8% deficits projected. Interest expense now exceeds defense spending, signaling potential term premium increase from current 90 basis points toward historical 150-300 basis point range.; **Investment Positioning Strategy:** Maintain duration exposure within ten years on the curve to avoid extreme volatility in longer maturities. Move up in quality and allocate 30% to defensive structured products, as credit spreads remain in richest decile of past thirty years despite elevated uncertainty.; **Tariff Policy Baseline:** Assign 80% probability to 10% global baseline tariff with 40-50% effective rate on China and 25% on key sectors like semiconductors and pharmaceuticals. This creates effective 15% tariff rate, five to six times higher than January levels, dampening business investment incentives.

What did Greg Peters and Daleep Singh discuss on All the Credit?

PGIM Fixed Income's leadership analyzes current market volatility, assigning 50% probability to muddle-through scenario with 1-1.5% GDP growth and 3% inflation, while examining fiscal risks, dollar primacy erosion, and transformative technology tailwinds. Key topics include: **Fiscal Trajectory Risk:** US debt-to-GDP ratio hits 100%, heading to 130% by decade's end with 7-8% deficits projected. Interest expense now exceeds defense spending, signaling potential term premium increase from current 90 basis points toward historical 150-300 basis point range.; **Investment Positioning Strategy:** Maintain duration exposure within ten years on the curve to avoid extreme volatility in longer maturities. Move up in quality and allocate 30% to defensive structured products, as credit spreads remain in richest decile of past thirty years despite elevated uncertainty..

How long is this episode of All the Credit?

This episode is 27 minutes long. SignalCast provides an AI-generated summary so you can get the key insights in about 3 minutes.

All the Credit

Macro Shocks and Market Shifts

June 11, 2025

27 min episode · 2 min read

Greg Peters,Daleep Singh,Tom Purcelli

Episode

27 min

Read time

2 min

Topics

Investing, Leadership, Product & Tech Trends

AI-Generated Summary

Published Jan 2, 2026

Key Takeaways

✓Fiscal Trajectory Risk: US debt-to-GDP ratio hits 100%, heading to 130% by decade's end with 7-8% deficits projected. Interest expense now exceeds defense spending, signaling potential term premium increase from current 90 basis points toward historical 150-300 basis point range.
✓Investment Positioning Strategy: Maintain duration exposure within ten years on the curve to avoid extreme volatility in longer maturities. Move up in quality and allocate 30% to defensive structured products, as credit spreads remain in richest decile of past thirty years despite elevated uncertainty.
✓Tariff Policy Baseline: Assign 80% probability to 10% global baseline tariff with 40-50% effective rate on China and 25% on key sectors like semiconductors and pharmaceuticals. This creates effective 15% tariff rate, five to six times higher than January levels, dampening business investment incentives.
✓Technology Transformation Potential: General purpose technologies including artificial general intelligence, quantum computing, synthetic biology, and nuclear fusion offer joint probability above 50% for commercial deployment. These intangible, self-improving assets can diffuse globally faster than historical infrastructure-dependent technologies, primarily benefiting US and China competitiveness.

What It Covers

PGIM Fixed Income's leadership analyzes current market volatility, assigning 50% probability to muddle-through scenario with 1-1.5% GDP growth and 3% inflation, while examining fiscal risks, dollar primacy erosion, and transformative technology tailwinds.

Key Questions Answered

•Fiscal Trajectory Risk: US debt-to-GDP ratio hits 100%, heading to 130% by decade's end with 7-8% deficits projected. Interest expense now exceeds defense spending, signaling potential term premium increase from current 90 basis points toward historical 150-300 basis point range.
•Investment Positioning Strategy: Maintain duration exposure within ten years on the curve to avoid extreme volatility in longer maturities. Move up in quality and allocate 30% to defensive structured products, as credit spreads remain in richest decile of past thirty years despite elevated uncertainty.
•Tariff Policy Baseline: Assign 80% probability to 10% global baseline tariff with 40-50% effective rate on China and 25% on key sectors like semiconductors and pharmaceuticals. This creates effective 15% tariff rate, five to six times higher than January levels, dampening business investment incentives.
•Technology Transformation Potential: General purpose technologies including artificial general intelligence, quantum computing, synthetic biology, and nuclear fusion offer joint probability above 50% for commercial deployment. These intangible, self-improving assets can diffuse globally faster than historical infrastructure-dependent technologies, primarily benefiting US and China competitiveness.

Notable Moment

The comparison of current conditions to the pre-World War One Gilded Age reveals parallels in technological disruption, wealth concentration, political populism, and rising nationalism, suggesting markets face prolonged volatility until deeper structural reforms emerge domestically and internationally.

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Episode Transcript

You're listening to All the Credit, a monthly podcast series brought to you by PGIM Fixed Income, an active global fixed income investment manager. Hi. This is Tom Purcelli, chief US economist, PGIM Fixed Income. Welcome to another edition of All the Credit. It seems like a a great time to do this given how volatile the backdrop has been, and maybe even more specifically, how volatile narratives around the backdrop have been. Every day, we're meeting with clients and getting tons of questions around this, which makes a ton of sense. Investors are looking for clarity. So our goal for today is try to make some sense out of what's been going on here. I have two fantastic guests to help us do just that. PGIM Fixed Income's co chief investment officer, Greg Peters, and our vice chair and global chief economist, Daleep Singh. Guys, thanks for being here. I think, Daleep, we probably need to start with you to sort of set the stage for us. And maybe I should set the stage for you setting the stage by just reminding everyone we take this probabilistic approach to forecasting. And so basically, we have our base case and then we have these tails and we assign probabilities to all of these outcomes. So tell us, where are we from a base case perspective? And then we can get into the tails, I think, a little bit. Tom, you and I have talked about this quite a bit. I mean, in The US, growth is slowing. Consumers are getting pinched by higher prices and lower income growth, and savings buffers have mostly eroded for lower and middle income families. And then if you think about businesses, there is more caution to spend and hire and invest at a time when CEOs are having to navigate nosebleed levels of uncertainty, not just from the tariffs, but also from the deficit implications of tax policy, which I think most corporate executives correctly see as deferred tax risk and a deferred higher cost to capital rather than a meaningful gross stimulus when you have near full employment, sticky high inflation, and very high levels of debt. And then you got the supply side of the economy. And here, I think there are a series of below the radar disruptions that are taking place. You, of course, have the supply disruption from tariffs, but you also have slower labor force growth from immigration policy, and you have a drying up of public sector investment as the tax incentives from the CHIPS Act and the IRA expire. So you put that together slowing demand and some damage to the supply side of the economy, and you get our model forecast, which we put a 50% weight on. And that looks for growth to step down from the 3% pace that we had on average the past couple of years to a one to one and a half percent real GDP growth pace. And along …

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