- Private credit has been a source of anxiety in markets this year.
- Mohamed El-Erian said this year that stress in the sector may be a "canary in the coal mine" moment.
- Goldman found that credit stress isn't a reliable indicator of broader financial market stress.
Goldman Sachs said the private credit fears that rattled Wall Street earlier in the year have been overdone.
The bank's analysts took a closer look at claims that credit stress functions as an indicator of a potential incoming financial crisis, determining that the reality is more complicated than doomsday quips may suggest.
"A common narrative among some market participants is that credit acts as a so-called 'canary in the coal mine', with spreads flagging stress before it reaches equities or the real economy," they wrote, noting, "We find limited historical evidence that credit has reliably led equities in drawdowns."
The alarm bells around private credit sounded in early 2026 when Blue Owl halted redemptions from a private debt fund, which prompted top investing pros to voice their concerns as several firms were hit with redemption requests.
Mohamed El-Erian said it was a "canary in the coal mine" moment reminiscent of the lead up to the 2008 financial crisis.
JPMorgan CEO Jamie Dimon also fanned fears late last year when he said there were likely cockroaches lurking in private credit, though he's since noted that he's not concerned about systemic risk.
Goldman found that rather than credit stress emerging ahead of equity stress, the two most often sell of in tandem. The Great Financial Crisis and the European debt crisis both saw credit and equities sell off together.
The firm made an important note that "the size and structure of the global corporate credit market have evolved materially since those first two episodes."
The structure of today's market make credit spreads, or the the extra costs of private debt over a benchmark like government bonds, a less reliable indicator of risk since, the bank said.
"Against that backdrop, global credit spreads remain tight and are not flashing clear warning signals," Goldman said.
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