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A generational economic disruption from AI, a software meltdown, private credit agonies and now a major regional war!! 

Investors are heading for the exits. Nerves are fraying and emotional trading has kicked in. 

We are not belittling the impact that all these events are implying for global economic and earnings growth, however, it is still the case that the duration of these disruptions have not yet become long enough to spill over into the real economy. Whether it’s the rise in Brent Crude to almost $80 per barrel or the 25% drop in the software ETF (IGV) or the 10% fall in the Financials ETF (IYF) YTD, all these are justified if the events described above turn out to have duration built-in.

We discuss the impact of the Iran War on the US economy and the economic implications. We also look at the impact of this nervousness on US Treasury yields and why current levels, if they persist, will make the new Fed Chair’s decision to lower rates much easier. 

We also look at the state of the private credit market and assess whether Blue Owl’s woes are an indication of the health of the sector or whether there is undue panic unfolding. Average rates charged in the sector are 8-12% but these headline rates are falling thanks to declines in the 10yr UST rates and Fed rate direction. What is concerning however is that according to Fitch, default rates are trekking higher from 5.6% in Dec 25 to 5.8% in 26 with particular pain felt in the software, consumer and healthcare sectors.

One of the ways the current woes turn into real economic headwinds is if the Iran War becomes a long, arduous ground offensive. The standing army is 610k with a further 350k reservists. A ground offensive would be disastrous in terms of human lives lost of course but also in terms of global growth. It would be particularly painful for the US economy and the current administration. US voters are not keen on ‘forever’ wars abroad and even less keen on the prospect of US casualties. The administration is already under water in the polls and the current insurgency will only make matters worse, the longer the process goes on. Prospects of a loss of both houses in November’s election becomes more likely. The last thing Trump and his cabinet want is a long war or a ground war.

If, and currently it’s a MAJOR IF, the current turmoil turns out to be a transient episode, this will have turned out to be a significant buying opportunity. With this in mind, buying the dips prudently and expeditiously would still be a sensible approach.

Always do your own research or seek the advice of your professional financial advisor.

You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.