Steffen Ullmann
Senior Portfolio Manager – Investment Grade
Rethinking Credit: A New Market Regime Requires New Principles
We are not living at the beginning of change, we are deep within it.
April 2, 2025 will go down in history as a turning point. What was once celebrated as a rules-based, open global trading system is under threat – pressured by its creator.
With the announcement of at least 10% tariffs on all imports into the USA, the world’s leading economy is opening a new chapter – characterized by isolationism, power politics and economic nationalism. The paradigm of comparative advantages is being replaced by a new dogma: national interests over global order.
The long-term consequences and new rules of the game are hard to grasp today. But it is precisely this uncertainty that is acting as a catalyst: credit risk premiums are rising, stock markets are coming under pressure, the dollar is losing confidence. Interest rates are decoupling from historical patterns and even classic ‘flight to safety’ movements are failing to materialize.
Many are talking about the beginning of a new era. We say: We are deep into this era. It is no longer rules that determine events, but political interests.
As early as 2018, Donald Trump began introducing protectionist measures – including tariffs and sanctions against China – that openly questioned globalized economic structures in the name of national interests. Measures that were not reversed even under the Biden administration.
The Covid-19 pandemic exposed the vulnerability of international supply chains – as well as the dependence of entire industries on individual countries. The resulting inflationary dynamics forced central banks around the world to raise interest rates to historic levels and sparked calls for “reshoring”.
In the midst of this tense situation, war returned to Europe in 2022. It not only exposed Europe’s energy dependencies, but also exacerbated the situation on the global commodity markets through sanctions and blockades. At the same time, geopolitical risks gained in importance and the return of national defense budgets marked a new era: an era in which national production capacities, key industries and strategic technologies once again became a question of sovereignty.
The result: historical multilateral trade relations are giving way – naive globalism is being replaced by national interests. The old order is disintegrating. All these developments have one constant in common: growing uncertainty. A look at the Global Economic Policy Uncertainty Index underlines this: it has been well above the long-term average for years – a clear signal of the continuing instability of economic policy conditions.
Source: Bloomberg, Bloom & Davis – Global Economic Policy Uncertainty Index; as at 31.01.2025
New reality, new rules – and a new way of thinking
The capital market environment is in a state of upheaval. Protectionism, geopolitical tensions and the resulting diverging inflation dynamics worldwide are shaping a new reality. Uncertainty is no longer a temporary phenomenon, but a permanent structural feature. For institutional investors with long-term commitments, this means that the rules of the game have changed.
But many investment approaches remain stuck in the old ways. Segmentation by region or currency, recourse to capital market-weighted indices – all this reflects a bygone world. These structures make integrated portfolio management difficult, systematically ignore real risks and opportunities and do not help to achieve long-term goals. Those who follow benchmark logic risk misallocations – and ultimately manage the past rather than the future.
What is needed are solutions that are aligned with objectives, not conventions. Flexible, principle-based actively centered on quality, controllability and delivering a robust risk/return profile. No “business as usual” – but no blind break either. Instead, a new way of thinking with a clear attitude.
Quality
Focus on creditworthy, resilient issuers – based on fundamental analysis, not index weighting.
Diversification
In a fragmented world, diversification is not an optimization, but a prerequisite for stability.
Predictability
Reliable cash flows and controllable portfolio development enable long-term target achievement.
HAGIM CIO Series
This is precisely where our approach comes in. With our modular Credit Income Opportunities concept, we offer a future-oriented solution for the new market regime – based on the principles of quality, diversification and predictability. Our aim is to provide institutional investors with a robust response to an environment full of uncertainties – flexible, targeted and manageable in the long term.
Risks
Price losses due to increases in yields and/or higher risk premiums are possible. A total loss cannot be ruled out either.
Past performance is not an indication of future results, nor can future performance be guaranteed.
Disclaimer
This marketing communication within the meaning of the German Securities Trading Act is provided for information purposes only and should not be construed as personal investment advice or a recommendation or solicitation to buy, sell or hold any financial instrument or to adopt any investment strategy. The opinions and statements contained in this document reflect the current assessment at the date of publication. The information contained herein does not constitute a complete analysis of all material facts relating to any country, region or market. No financial analyses are prepared. Where statements are made about market developments, returns, price gains or other asset growth and risk figures, these are merely forecasts and we accept no liability for their occurrence. In particular, past performance, simulations or forecasts are not a reliable indicator of future performance. Assets can fall as well as rise. All information has been carefully compiled, in some cases with recourse to third-party information. Individual details may prove to be no longer or no longer fully accurate, in particular due to the passage of time, changes in the law or current market developments, and may change at any time without prior notice. No guarantee is therefore given for the correctness, completeness and up-to-dateness of all information. Please inform yourself independently about all costs relevant to you. Maintaining a custody account may incur costs; ongoing bank charges may also be incurred. Transaction costs depend on the asset class: For government bonds and collateralized bonds such as Pfandbriefe, they average around 0.02 percent, for corporate bonds 0.085 percent. For less liquid bonds, the transaction costs can also be significantly higher than 0.25 percent. It should also be noted that transaction costs can temporarily be significantly higher during periods of market stress. For all products sold by HAGIM, all relevant cost information is made available prior to purchase. The information is based on our assessment of the current legal and tax situation. Insofar as tax or legal matters are affected, these should be discussed by the addressee with its tax advisor or lawyer. Investments in financial instruments are associated with both opportunities and risks. The handling of conflicts of interest at HAGIM is described at https://www.ha-gim.com/rechtlichehinweise published on the Internet. The information contained herein is intended for Professional Clients and Eligible Counterparties only. This information document is not directed at US citizens or persons permanently resident in the USA, nor at legal entities domiciled in the USA, nor may it be distributed in the USA