The 4Sight Weekly Report

Macro + private credit lens with an emphasis on this week’s risk-taking, valuation, and Fed messaging.

Theme — “Crowded Risk, Thin Cushion”

Global markets are wobbling after a powerful year-end rally: AI leaders are selling off, fund managers have slashed cash to near-cycle lows, and a fresh set of Fed speeches is pulling forward the debate over how fast to cut. Under the surface, ratings agencies and “bond kings” are flagging private credit as a potential fault line — just as investors are leaning hardest into risk.

Macro & Policy — Progress, But Not Victory

Inflation: The latest published CPI (September) still runs at 3.0% year-over-year for both headline and core, with a 0.3% m/m print; inflation progress has slowed versus earlier in the year (BLS, TradingEconomics).
Near-term trajectory: The Cleveland Fed’s nowcast points to roughly 0.18–0.31% m/m CPI in October–November, implying annualized inflation still meaningfully above 2% if sustained (Cleveland Fed).
Fed tone — split but shifting: Governor Waller argued this week for a continued rate-cut path, stressing slowing growth and the need to avoid overtightening, while Vice Chair Jefferson and Atlanta’s Bostic highlighted that inflation is running “a bit below 3%” but has stalled due to tariff effects and remains uncomfortably high (Fed speeches, Nov 12 & 17).
Hawkish dissent: Cleveland Fed President Beth Hammack, who opposed October’s cut, warned last week that policy should remain “restrictive for longer,” citing more persistent inflation and only modest labor softening (Cleveland Fed / Reuters).
Rates: The U.S. 10-year Treasury yield is oscillating around ~4.1% as of November 18, after backing off early-month highs; volatility around Fed pricing and equity risk-off days has driven sharp day-to-day swings (FRED, Investing.com).

Market Sentiment — Risk-On… and Nervous

Positioning

Bank of America’s latest global fund manager survey shows cash balances down to about 3.7%, triggering the bank’s own “sell signal” for risk assets; investors have rotated heavily into equities and commodities and away from cash (BofA survey via Reuters).
The survey flags “long Magnificent 7” as the most crowded trade and identifies private equity and private credit as the most likely source of a future systemic credit event.

Valuation & AI

A broad global sell-off over the last several sessions has been driven by concern that AI-linked valuations are stretched; U.S., European and Asia-Pacific indices are all logging their sharpest declines in weeks as enthusiasm around mega-cap tech and AI cools (Guardian, Forex.com / Saxo).
Jeffrey Gundlach (“bond king”) told investors this week that “pretty much everything is overvalued,” calling out U.S. equities, traditional 60/40 portfolios, and even parts of the bond market, and highlighting an AI-driven speculative tone reminiscent of prior bubbles (MarketWatch).

Private Credit — Under a Brighter Spotlight

Moody’s released a new report warning that the rapid evolution of private credit is introducing “new layers of complexity and risk.” Key concerns: leverage that’s obscured by novel structures, increased use of payment-in-kind (PIK) features, and erosion of core investor protections in competitive deals (Bloomberg / Moody’s).
The BofA survey echoes these concerns: a majority of institutional investors now cite private equity and private credit as the most likely origin of the next systemic credit event, even as allocations to these asset classes remain elevated.
For middle-market and specialty finance borrowers, this means lenders are increasingly bifurcating between:
- “Transparency credits” — audited KPIs, standard covenants, frequent reporting, clean capital structures;
- “Story credits” — complex structures, PIK-heavy features, weaker documentation, or opaque sponsors.

Three Things That Matter for Allocators Right Now

Focus	What’s New This Week	Implication
Fed path	Waller, Jefferson, Bostic and Hammack delivered mixed but detailed views; consensus: inflation progress has stalled near ~3%, but downside risks to employment are rising.	Rate cuts in 2026 remain likely, but pace and size are more conditional. Don’t build a portfolio that only works if the Fed is aggressive.
Positioning risk	BofA survey shows low cash, crowded AI/mega-cap trades; global indices are experiencing a multi-day tech-led pullback.	Beta is crowded. Incremental return needs to come from structure, underwriting, and sector selection — not more exposure to the same trades.
Private-credit plumbing	Moody’s and Gundlach both call out private credit as a potential stress point, particularly where structures hide leverage or weaken protections.	LPs will increasingly differentiate between “plain-vanilla senior with real covenants” and “yieldy, structure-light deals.” Documentation is now a primary risk tool, not a footnote.

What It Means Right Now

Treat yield as earned, not given: With multiple respected voices flagging broad overvaluation and private-credit risk, investors should assume that extra yield without extra structure is mispriced risk, not free return.
Stay senior, stay selective: Senior, floating-rate, short-tenor exposures to resilient, cash-flowing sectors (healthcare, B2B services, critical infrastructure) remain the core “sleep-at-night” allocation.
Demand transparency as a pre-condition: Monthly KPI reporting, realistic leverage, and enforcement-ready covenants should be treated as an entry ticket, not a negotiating luxury.
Have a plan for an AI / growth unwind: If crowded tech trades de-rate further, expect second-order effects on funding conditions, equity cushions, and exit valuations — especially for growth-tilted borrowers.

Risk Watch

Valuation reset risk: Prolonged or deeper AI/mega-cap drawdowns could drag indexes and erode sponsors’ equity buffers across deals linked to growth narratives.
Policy misstep: If the Fed underestimates lingering inflation — or caves too quickly to labor softness — term premia and risk premia could readjust abruptly.
Hidden leverage in private credit: Structures that push true leverage into affiliates, PIK toggles, or off-balance-sheet vehicles may produce surprise loss severity in stress.

Opportunity Watch

Documentation premium: Deals that preserve covenants, reporting, and sane leverage should command capital even at slightly lower coupons — and may outperform in any orderly repricing.
Non-crowded income: Senior secured positions in less “headline-y” sectors (e.g., essential services, recurring-revenue B2B) can offer attractive carry without AI-bubble exposure.
Selective global diversification: With Gundlach and others arguing U.S. assets are broadly expensive, selectively adding non-U.S. and EM fixed income in well-governed markets may improve portfolio resilience.

Quote of the Week

“When everyone is leaning the same way, yield isn’t protection — discipline is.”

References (APA style)

U.S. Bureau of Labor Statistics. (2025, October 24). Consumer Price Index – September 2025. https://www.bls.gov/news.release/cpi.nr0.htm
Federal Reserve Bank of Cleveland. (2025, November 17). Inflation Nowcasting. https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting
Waller, C. (2025, November 17). The Case for Continuing Rate Cuts. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/newsevents/speech/waller20251117a.htm
Jefferson, P. (2025, November 17). Economic Outlook and Monetary Policy. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/newsevents/speech/jefferson20251117a.htm
Bostic, R. (2025, November 12). Weighing the Risks: Why Inflation Tips the Scales. Federal Reserve Bank of Atlanta. https://www.atlantafed.org/news/speeches/2025/11/12/bostic-weighing-the-risks-why-inflation-tips-the-scales
Hammack, B. (2025, November 13). Remarks at the Pittsburgh Economic Club. Summary in Reuters: Fed's Hammack says restrictive monetary policy needed to cool inflation. https://www.reuters.com/business/feds-hammack-restrictive-monetary-policy-needed-cool-inflation-2025-11-13/
Bank of America. (2025, November 18). Fund Manager Survey. Key excerpts via Reuters: Investors raise risk bets but cash flashes 'sell signal'. https://www.reuters.com/business/investors-still-bullish-positioning-is-headwind-markets-bofa-survey-2025-11-18/
Moody’s Ratings. (2025, November 17). Private credit’s rapid evolution is raising risks. Coverage via Bloomberg.
Gundlach, J. (2025, November 18). Comments reported in MarketWatch: Stocks, bonds — and pretty much everything — are overvalued, says 'bond king'. https://www.marketwatch.com/story/stocks-bonds-pretty-much-everything-is-overvalued-bond-king-says-0e421a85
The Guardian. (2025, November 18). Stock market sell-off continues, as Google boss warns 'no one is safe' from AI disruption (live markets blog). https://www.theguardian.com/business/live/2025/nov/18/stock-market-sell-off-ai-bubble-google-nvidia-ftse-100-bitcoin-business-live-news
FOREX.com / Saxo Bank. (2025, November 18). Market Overview – AI valuations unwind. https://www.forex.com/en-us/news-and-analysis/market-overview-ai-selloff-dax-breaks-support-fed-commentary-tariff-cuts-brazil-rare-earths/
Federal Reserve Bank of St. Louis. (2025). Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity (DGS10). https://fred.stlouisfed.org/series/DGS10
Investing.com. (2025, November 18). U.S. 10-Year Bond Yield – Historical Data. https://www.investing.com/rates-bonds/u.s.-10-year-bond-yield-historical-data