Risks and resilience: H1 2025 European loan market review
Despite volatility and uncertainty, the European loan market in 1H 2025 proved relatively resilient. However, with the credit cycle maturing, we believe now is the time for investors to be particularly vigilant.
Whilst public equity markets saw significant volatility in the first half of the year, the European loan market was relatively stable. However, during the second half of 2025, both risks and opportunities lie ahead for investors.
The first half of 2025 was nothing if not eventful. In the immediate aftermath of US President Donald Trump’s tariffs announcement, public equity markets fell around 10% before rebounding almost as quickly. Volatility remained elevated with the tariff’s endgame remaining unclear. However, despite all the noise, the European loan market proved to be a relatively safe harbour for investors. We look back on key events during the first six months of the year, their impact on the European loan market and consider what investors can likely expect as the year progresses.
Whilst every week seemed to bring another challenge for markets to deal with, so far in 2025 there have perhaps been three key themes which have impacted the European loan market.
Tariff turbulence
At the start of April, President Trump, via social media, upended financial markets with the announcement of a sweeping set of reciprocal tariffs intended to re-balance what the president believed to be unfair tariffs being levied against the United States. With almost 90 countries targeted, global markets went into a tailspin. US equities witnessed one of their sharpest single-day declines since World War II and 30-year US Treasury yields briefly surpassed 5%, unmistakable evidence of investor anxiety.
Despite this drama however, the syndicated loans market demonstrated notable resilience, experiencing only a modest -0.28% decline in April. The market rapidly recouped its losses, supported by robust economic data, easing inflation and a temporary de-escalation of trade tensions. By the time the first quarter of the year had closed, risk assets had rebounded with US equities 11% higher and European equities posting a respectable 1.4% gain.