Group 1 - Goldman Sachs analyst Ryan Nash raised the price target on Enact Holdings (ACT) to $45 from $41 while maintaining a Neutral rating on the shares [1] - Regional banks underperformed the market by 200-300 basis points in 2025 due to macro concerns and credit worries, although stocks rallied 13% late in the year [1] - For 2026, factors such as solid loan growth, net interest income momentum, positive operating leverage, and improving returns are expected to support continued multi-year fundamental improvement, with credit risk identified as the main wildcard [1]

Goldman Sachs raised the firm’s price target on First Horizon (FHN) to $27 from $24 and keeps a Neutral rating on the shares. Regional banks underperformed the market by 200-300 basis points in 2025, weighed by macro concerns and credit worries, though stocks rallied 13% late in the year, the analyst tells investors in a research note. Looking to 2026, solid loan growth, net interest income momentum, positive operating leverage, and improving returns support continued multi-year fundamental improvement, wi ...

Federal Reserve Policy & Economic Outlook - The Federal Reserve cut rates for the third consecutive time this year, despite growing dissent [1] - The Fed is committed to purchasing $40 billion of Treasury bills per month [1] - The base case is a hold on further rate cuts, contingent on weakening labor market or improved inflation [3] - Markets are predicting a different path than the Fed's dot plot, with expectations of rate cuts between 3% and 3.25% [5] - There is a risk of losing Fed independence, which could cause yields to rise [17] Inflation & Labor Market - Tariffs are estimated to contribute approximately 0.5 percentage points to inflation [9] - The Fed is facing a difficult balancing act with inflation above target and a weakening labor market [8] - The Fed has delivered 175 basis points of cuts [43] Credit Market Dynamics - High-grade bond sales cooled in December, with $4.7 billion sold, a quarter below the previous period [26] - December bond sales in high yield exceeded $20 billion, the busiest December since 2020 [26] - Investment grade supply is expected to grow year-over-year, reaching approximately $1.8 trillion to $1.9 trillion in 2026 [30] - Tech supply was up 75% and is expected to double, driven by hyperscalers' CAPEX expansion [32]

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the global credit market outlook for 2026, focusing on the US and EU credit markets, private credit, and the impact of AI on debt financing [2][3][4][6][39]. Core Insights and Arguments 1. **Credit Spread Projections**: - US investment grade (IG) and high yield (HY) spreads are expected to widen to 100 basis points (bp) and 350bp respectively by Q1 2026, before narrowing to 85bp and 300bp by year-end 2026 [5][42]. - EU IG and HY spreads are projected at 80bp and 275bp by the end of 2026, with expectations of outperformance during widening phases [5][8]. 2. **Default Rate Expectations**: - Default rates are anticipated to rise, particularly in private credit, which is in a more advanced stage of the credit cycle. A rise of 200-300bp in private credit defaults is forecasted, while US leveraged loans and high yield are expected to increase by 50-100bp through mid-2026 [5][22][68]. 3. **Economic Conditions**: - The US faces late-cycle stress with a 36% probability of recession by late 2026, driven by weakening corporate profits, higher interest costs, and rising non-performing loans [5][39][60]. - Labor market softness is expected to persist into 2026, with declining consumer sentiment and durable goods sales [5][39]. 4. **Sector Concentration Risks**: - Private credit markets show high sector concentration, particularly in services, technology, and healthcare, increasing vulnerability to sector-specific shocks [5][40][87]. 5. **Global Credit Issuance**: - An increase in global credit issuance is expected in 2026, led by US IG and HY markets, driven by hyperscaler capital expenditures and increased M&A activity [5][26][41]. 6. **AI Impact on Credit Markets**: - The emergence of AI is seen as a double-edged sword, with potential for both disruption and growth. A bust in AI could negatively impact 20-30% of newer firms in private credit, while a boom could drive productivity gains [5][40][43]. 7. **Investment Strategies**: - Recommended trades include long positions in EU IG vs. US IG, long US equities vs. credit, and long put spreads on dividend futures [5][16][42]. Additional Important Insights 1. **Credit Fundamentals**: - US corporate balance sheet health is deteriorating, with IG scores below median levels, while European metrics appear healthier [5][28][65]. - The private credit sector's exposure to AI presents systemic risks, particularly among US mega-cap banks and private equity-owned firms [5][40]. 2. **Market Sentiment and Technicals**: - Weaker US credit technicals are anticipated in H1 2026 due to increased issuance and reduced overseas demand, although demand may improve later in the year [5][41]. 3. **Consumer Credit Cycle**: - The consumer credit cycle is showing signs of deterioration, with weaker sentiment reflected in housing and auto sales data [5][70]. 4. **Historical Context**: - Current exposure to public and private credit markets is significantly higher than during previous crises, indicating increased systemic importance [5][75]. 5. **Risks and Scenarios**: - Downside risks include an AI bust and a bond market shock, while upside risks are associated with an AI boom driving productivity gains [5][43]. This summary encapsulates the critical insights and projections discussed in the conference call, providing a comprehensive overview of the current state and future outlook of the credit markets.

Core Viewpoint - Truist analyst Matthew Coad has lowered the price target for Block (XYZ) to $67 from $74 and maintains a Sell rating on the shares due to increased credit risk taken on by Block [1] Summary by Category Price Target Adjustment - The price target for Block has been reduced from $74 to $67 [1] Earnings Multiple - The earnings multiple is being cut to a range of 21-times to 24-times as a result of Block's increased credit risk [1] Analyst Rating - Truist maintains a Sell rating on Block shares following the adjustments made in the research note [1]

Credit Risk Assessment - Eskom's credit risk measure has narrowed to a one-year low [1] Investor Sentiment - Investors are increasingly betting that Eskom has turned a corner [1] Company Performance - South Africa's state-owned power utility, Eskom, is showing signs of improvement [1]

Risks and Warnings - Fitch Ratings warns that Vietnam's banks' rapid pace of lending is fueling risks [1] - Risks could increase when the government removes a long-standing credit quota system [1]

Federal Reserve & Monetary Policy - The Federal Reserve is divided on the current state of the economy, leading to uncertainty about future policy decisions [1][2][6] - Market participants anticipate the Federal Reserve to cut rates, with expectations of a terminal rate slightly below 3% [3][20] - Some argue that current monetary policy is not restrictive and further rate cuts could contribute to inflation, especially hurting the lower-income portion of the K-shaped economy [11][12] - BlackRock expects CPI tariffs to be closer to 25% by the end of 2026, potentially allowing monetary policy to be less restrictive [15] Economic Indicators & Consumer Sentiment - U S consumer sentiment hit a three-year low, matching levels from June 2022, due to high prices and the government shutdown [1][5] - Challenger job cut data shows a significant spike in job losses in October, particularly in the tech and warehousing sectors, with the biggest number in the last seven months [4][9] - Alternative data sources, such as ADP for jobs and jobless claims, are being used to model the economy in the absence of official government data [18] Bond Market & Credit - Global bond sales have hit a record, with nearly $6 trillion in corporate and sovereign debt sold in 2025, driven by strong demand [1][30] - Alphabet raised $25 billion between Europe and the U S , with $175 billion in the U S market, contributing to a busy November for Wall Street [30] - Corporate bond spreads are considered complacent, and some suggest that corporate credit is not the best place to be in fixed income, recommending agency mortgage-backed securities, munis, or treasuries instead [26][27][28] - High-yield bond defaults are at a normal level of 1% to 2%, but there is a need for discipline in lending standards as supply outstrips demand [32][33]

Financial Data and Key Metrics Changes - Old National Bancorp reported GAAP earnings per share of $0.46 for Q3 2025, with adjusted earnings per share of $0.59, reflecting an 11% increase from the prior quarter and a 28% increase year over year [7][12] - The company achieved a 20% return on average tangible common equity and a 1.3% return on assets, with an efficiency ratio below 50% [3][5] - The CET1 ratio increased by 28 basis points to over 11%, and tangible book value per share grew by 4% from Q2 and 10% year over year [7][15] Business Line Data and Key Metrics Changes - Total loans grew 3.1% annualized from the previous quarter, with production up 20% from the prior quarter [8][9] - Adjusted non-interest income was $130 million for the quarter, exceeding guidance, driven by strong performance in capital markets [12][18] - Adjusted non-interest expenses were $376 million, reflecting a full quarter impact of Bremer operations, with a low efficiency ratio of 48% [13][19] Market Data and Key Metrics Changes - Total deposits increased by 4.8% annualized, with core deposits (excluding brokered) increasing by 5.8% annualized [10][11] - Non-interest bearing deposits remained at 24% of core deposits, and brokered deposits decreased modestly [10][11] - The company achieved an approximate 85% beta on its exception price book spot rate in conjunction with the Fed rate cut in September [11] Company Strategy and Development Direction - The company is focused on organic growth and returning capital to shareholders, emphasizing that the best acquisition is itself [5][25] - Management is strategically recruiting top-tier talent and investing in future growth opportunities while enhancing efficiency [4][6] - The company aims to leverage its leading market position and capitalize on market disruptions [4][5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit outlook, noting a decline in criticized and classified loans and stable credit metrics [15][19] - The company anticipates continued success in executing its deposit strategy and expects to meet or exceed industry growth in 2025 [18][19] - Management highlighted that the systems conversion for the Bremer Bank partnership was successful, with positive client sentiment and operational efficiency [36][38] Other Important Information - The company repurchased 1.1 million shares late in the quarter, reflecting confidence in capital levels and the trajectory of the business [16][102] - The full run-rate cost savings from the Bremer acquisition are expected to materialize in Q1 of the following year [95][96] Q&A Session Summary Question: What drove the reduction in NII expectations for the fourth quarter? - Management indicated that the reduction from $590 million to $585 million is minor relative to the overall balance sheet size and reflects stable dynamics [22][23] Question: What are the preferred uses for capital moving forward? - Management emphasized organic growth as the primary focus, with opportunistic buybacks based on capital generation [24][25] Question: How did the systems conversion go? - Management reported that the systems conversion was the best to date, with high client satisfaction and minimal issues [36][38] Question: What is the outlook for loan growth from Bremer? - Management expects consolidated loan growth to align with overall company growth, with no significant swings anticipated [70][73] Question: How does the company view the credit environment? - Management described the credit outlook as stable to improving, with a focus on active portfolio management [97][99]

Core Insights - McKesson Corporation has a market capitalization of $97.9 billion and is a leader in healthcare services and information technology, operating through four segments: U.S. Pharmaceutical, Prescription Technology Solutions, Medical-Surgical Solutions, and International [1] Financial Performance - McKesson is expected to announce its fiscal Q2 2026 results on November 5, with analysts forecasting an adjusted EPS of $8.92, representing a 26.2% increase from $7.07 in the same quarter last year [2] - For fiscal 2026, analysts predict an adjusted EPS of $38.12, a 15.3% increase from $33.05 in fiscal 2025 [3] Stock Performance - Over the past 52 weeks, McKesson's stock has increased by 54.9%, outperforming the S&P 500 Index's rise of 15.1% and the Health Care Select Sector SPDR Fund's decline of 3.1% [4] Recent Developments - Despite reporting a better-than-expected Q1 2026 adjusted EPS of $8.26 and revenue of $97.83 billion, McKesson's shares fell by 5.8% the following day due to a 10.7% drop in GAAP EPS to $6.25, attributed to a $189 million bad debt provision related to the Rite Aid bankruptcy [5] Analyst Ratings - The consensus rating for McKesson stock is bullish, with a "Strong Buy" rating from 12 out of 17 analysts, while the average price target is $839.27, indicating a potential upside of 6.3% from current levels [6]