...Tariff-Driven Turmoil, But First Order Impacts Seem Limited With the tariff announcements on April 2, the second quarter began with heightened volatility and the steepest decline in equity markets since the COVID-19 pandemic, followed by a significant widening of credit spreads. We expect the tariffs to have limited primary impact on the credit-estimated companies in our rated middle-market collateralized loan obligations (CLOs) given the portfolio's concentration in service-oriented sectors like software, healthcare, and professional services. However, second-order effects could pose challenges in coming quarters with weaker consumer spending, lower corporate investments, recessionary headwinds, and broader market volatility weighing on borrower performance. Credit Estimate Downgrades Slow, But Challenges Persist The first quarter saw a total of 59 credit estimate downgrades, the lowest number since the second quarter of 2023, and 55 upgrades, for a downgrade-to- upgrade ratio of 1.07...
