(Harvest) At 10 years and counting, the US credit cycle appears to be nearing an end. Could a sweeping rewrite of the tax code keep it alive a little longer? Maybe. Credit cycles vary around the world and have distinct stages. During the expansionary period, easy access to credit helps boost earnings and prompts companies to take on debt. As those debt levels rise, so does credit risk. A rise in interest rates usually leads to lower asset values, causing lenders to get stingier. This typically leads to a period of contraction and balance-sheet repair and, eventually, a recovery phase. We are seeing this full cycle play out in the high-yield energy sector following the collapse in oil prices in 2015.

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