"First the collapse of First Brands Group and Tricolor Holdings revived long-dormant fears about hidden credit losses. Then, fraud-linked writedowns at Zions Bancorp and Western Alliance - erasing more than $100 billion in US bank share value in a day - stoked concern that the lending stress is more pervasive. Until recently, investors have shrugged off everything from the government shutdown to stretched valuations, buoyed by the AI boom and resilient consumer data."
"According to Societe Generale, allocations to risky assets like equities and credit climbed to 67% of tracked portfolios at the end of August - near peak levels. Stocks still ended the week with a tidy gain, extending a bull market that's already added $28 trillion to its value, after President Donald Trump retreated from last Friday's tariff threats. But six days of volatility across assets shows a deeper anxiety taking hold: credit fragility."
Collapse of First Brands Group and Tricolor Holdings revived fears of hidden credit losses. Fraud-linked writedowns at Zions Bancorp and Western Alliance erased more than $100 billion in US bank share value in a day and stoked concern that lending stress is more pervasive. Investors had recently shrugged off risks thanks to the AI boom and resilient consumer data, pushing risky-asset allocations to 67% of tracked portfolios. Stocks still rose after President Trump retreated from tariff threats, but six days of volatility exposed credit fragility, with over $3 billion leaving high-yield bond funds. Quant strategies isolating credit risk and pair trades shorting leveraged firms delivered gains, prompting large managers such as Legal & General to reduce risk.
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