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Tariffs, interest rates, inflation, and regulation were top of mind for private credit investors in the aftermath of Donald Trump’s victory in the US presidential election this week.

In our conversations with lenders in the days following, they expressed a mix of concern and tempered optimism when mulling over the policy shifts that could result from the incoming administration, ranging from potential trade wars and deviations on the rate cutting path to favorable firings and new appointments at regulatory bodies like the SEC.

For Luke Chan, partner at HighVista Strategies, an $11bn AUM specialty alts firm, there are counteracting forces from the administration that are likely to emerge.

He said that the president elect seems to indicate a preference for lower interest rates, which could boost overall growth and add demand for private credit. While at the same time, certain policy proposals, such as a new tariff regime and the resulting trade war, could offset downward moves in interest rates by introducing new inflationary pressures, Chan said.

Trump’s proposed new tariff regime could involve a universal tariff of 10% on all imports and additional tariffs of 60% to 100% on imports from China. This was raised repeatedly as the most relevant and readily apparent impact of the election by private credit investors.

“Every lender and investment committee that meets from now until policy certainty is attained will scrutinize the impact of tariffs on a potential borrowers’ financial outlook, to the extent that the borrower is in a relevant industry,” said Chan.

Chan clarified that this doesn’t mean that deals won’t happen, or that the impact of tariffs will be purely negative, as it will impact various companies and industries differently — a domestically- sheltered manufacturer may be helped by the tariffs, for example, while an export-oriented manufacturer may be hurt by it.

Another lender agreed that some sectors may benefit from such proposals, but it is unlikely to create a dramatic shift in lending strategies.

“There’s some chatter about target industries being impacted by potential tariffs as opportunity but no change in capital deployment,” they said.

Another lender we spoke to was focused on the impact that the presidency could have on Fed policy, noting that US treasury yields spiked yesterday alongside elevated inflation expectations. Some economists suggested that the Fed’s rate cutting campaign could be paused or slowed down if inflationary pressures intensify next year.

The second lender noted that most of their loans are floating rate, so that a potential higher-for-longer scenario under Trump could be good for lenders’ investment income.

“The 10-year reacted strongly, but does this mean that the Fed is forced to pause its easing cycle and that SOFR moves back to 5.3%?” said the second lender.

On the same topic, a private credit lawyer told 9fin that if rates stay higher than anticipated and inflation remains elevated, the expected deluge of M&A investors are hoping for in 2025 might not bear out. However, they anticipate GPs adapting when it comes to making deals work, even if rates end up somewhere higher than expected.

“People are banking on yields coming down to invigorate M&A activity. If yields go back up or stay static, what will that do for for M&A? People are just going to have to accept that that's the world they live in and they're gonna have to do deals in a higher rate environment,” said a private credit lawyer.

A cautiously optimistic sentiment was echoed on FS KKR Capital Corp.’s earning call, when co-president and CIO Dan Pietrzak said that their initial view is that rates will continue to trend down, although it might be at a slower pace than what they expected a few months ago.

“As it relates to the potential impact of the presidential election, I think our initial gut is while rates will continue to trend down, it probably will be a little bit slower than maybe we would have guessed 30 or 60 days ago,” said Pietrzak.

Another consideration that was raised regards potential changes at the SEC, which could have major implications for the regulatory environment that private credit and the broader private markets contend with in the next administration.

As we’ve discussed in previous coverage, certain members of the current administration (particularly the FTC’s Lina Khan and the SEC’s Gary Gensler) have had a more aggressive approach when it comes to anti-trust enforcement and regulating private markets. Participants we spoke to expect that more industry-friendly figures being appointed to those agencies will reverse some of these regulatory trends.

“The anti-trust push is likely to end, in addition likely no real risk on more changes to carry taxation,” said one private equity source, adding that Trump’s election will also likely mean that tax provisions introduced in 2017 are extended beyond their current deadline of the end of 2025. The law reduced the corporate tax rate to 21% from 35% and capped deductions for state and local taxes at $10k.

Hooman Yazhari, partner at Michelman & Robinson, told 9fin that less regulation could make private credit firms less competitive vis-à-vis banks if the Trump administration deregulates the banks, therefore reducing the advantage private credit firms have.

"Counter-intuitively, lower regulatory hurdles for all may actually not be that great for private credit lenders, because one of their superpowers today is they are not really regulated as compared to the traditional banks. Less regulation for all, including the banks, is their kryptonite” said Yazhari.

Another direct lender told 9fin that, aside from some of the more obvious potential implications of tariffs, the lack of policy certainty and explicit detail on potential new legislation means that there isn’t a whole lot for them to work with when it comes to preparing for upcoming changes.

“No one knows what he wants to do or is going to do, so everything is kind of in flux.”

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