Corporate Health Outlook: Resilience Meets Late-Cycle Pressure

Corporate credit fundamentals should remain resilient over the next six months, but accelerating costs, rising leverage and tighter monetary conditions call for greater selectivity rather than broad defensiveness.

• Loomis Sayles’ September 2026 CANDIs survey found improving profit-margin expectations and credit outlooks, with little evidence of widespread corporate distress.
• Input and supply-chain cost expectations rose to one of their highest levels since the survey began in 2022, with higher costs expected across every manufacturing industry over the next six months.
• Pricing power was flat, suggesting companies may not be able to pass all higher costs on to customers and that margins could therefore come under pressure.
• Leverage expectations continued to rise, but only gradually; the analysts’ crisis indicator showed little evidence of broad-based or systemic financial stress.
• Services analysts became much more positive on profit margins, while manufacturing margin expectations fell sharply, even as manufacturing business-condition expectations rose significantly above those for services.
• The Federal Reserve has returned to tightening mode and borrowing costs have increased, making valuations less attractive even though demand and earnings remain supportive.

Takeaway: The credit cycle appears to be entering a more mature phase, so investors can continue seeking carry but should favor stronger fundamentals and use macro-driven volatility selectively rather than adopting a defensive stance.