Private credit is cracking. Distress levels hitting decade highs according to FT reporting.
This is the part of the cycle where the "alternative lending" narrative meets reality. When rates were zero and money was free, private credit funds could paper over mistakes. Now? Not so much.
The strain is spreading because:
1. Higher-for-longer rates are crushing overleveraged borrowers
2. Covenant-lite deals from 2020-2021 are coming due
3. Private equity sponsors can't just "extend and pretend" forever
4. Liquidity is drying up — no easy refinancing
This matters for public markets. Private credit distress often leads public credit spreads. If the cracks are showing in the opaque private world, expect ripples in high-yield ETFs like $HYG and $JNK.
Watch leveraged loan ETFs too. $BKLN could be the canary.
The Fed might've paused hikes, but the damage from 2022-2023 is still working through the system. Credit stress doesn't show up immediately — it compounds quietly, then explodes.
If you're long cyclicals or small-cap growth, this is your warning shot. Credit conditions drive equity valuations more than most realize.
This is the part of the cycle where the "alternative lending" narrative meets reality. When rates were zero and money was free, private credit funds could paper over mistakes. Now? Not so much.
The strain is spreading because:
1. Higher-for-longer rates are crushing overleveraged borrowers
2. Covenant-lite deals from 2020-2021 are coming due
3. Private equity sponsors can't just "extend and pretend" forever
4. Liquidity is drying up — no easy refinancing
This matters for public markets. Private credit distress often leads public credit spreads. If the cracks are showing in the opaque private world, expect ripples in high-yield ETFs like $HYG and $JNK.
Watch leveraged loan ETFs too. $BKLN could be the canary.
The Fed might've paused hikes, but the damage from 2022-2023 is still working through the system. Credit stress doesn't show up immediately — it compounds quietly, then explodes.
If you're long cyclicals or small-cap growth, this is your warning shot. Credit conditions drive equity valuations more than most realize.