2025 delivered big macro headlines, yet markets stayed unusually calm, with volatility only briefly flaring around events like “Liberation Day” and tariff implementation. In this environment, our financial credit strategies performed very strongly, supported by banks entering the year with record balance sheets and the best profitability in 15 years.
For 2026, European banking fundamentals should remain solid, and lower financial issuance may improve technicals, but spreads are already tight. We remain cautious as several risks may be underpriced: tariff uncertainty could bring fiscal deficits back into focus, while rising tech-sector funding needs could drive heavy issuance and pressure broader IG technicals.
Overall, the fundamental case for financial credit remains compelling, though we are approaching 2026 with more focus on implementation discipline, volatility awareness, and holding liquidity to stay flexible.
Watch Sebastiano Pirro (CIO & Financial Credit Portfolio Manager, Algebris Investments) in his latest video.
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