Q1 Market Recap: How Private Credit, AI, & War Have Dominated 2026 So Far | The Weekly Wrap

**Steve Eisman** (0:00)
Hi, Steve Eisman here. On My Weekly Wrap, I try to both teach and convey information as objectively as possible. I try to make clear what are the facts and what are my opinions. But in today's media, it's increasingly hard to figure out what are the facts and where the facts are being shaded by opinion. That's why when I look into news events, I first go to ground news. Ground news is my solution for getting to the facts of important stories, but also to see how left, right, and center are seeking to convey the same exact story. Take for example the recent headline, Trump Tells Allies Facing High Fuel Prices to Buy US Oil or Get Your Own Oil from Straight Off Home Oos. That's a pretty provocative headline, ripe for reporters and commentators to shade the truth. I went to groundnews.com and clicked on that story headline. There, I immediately saw four tabs, left, center, right, and bias comparison. When I clicked on left, a series of headlines appeared, all from left-leaning media sources. One headline said, Trump Warns UK, US Won't Be There To Help You Anymore In Tyrade Over Iran War. When I clicked on the right tab, I saw headlines with a different tone. One such headline said, Trump Reproached His Allies For Lack Of Support In The War. The bias comparison tab showed groundnews' own analysis of how all three political leanings, left, right, and center, conveyed the same exact story. I find the groundnews system enormously helpful because it allows me to easily separate the facts from opinions. I use groundnews and I recommend you try it out. Go to groundnews.com/real for a better way to stay informed. Subscribe through my link for 40% off their unlimited access to worldwide coverage. That's groundnews.com/real, groundnews.com/real.
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**Steve Eisman** (2:26)
Over the weekend, President Trump threatened to blow up Iran's infrastructure and gave a deadline of Tuesday night. President Trump announced a two-week ceasefire, and Iran pledged to reopen the Strait of Hormuz. We will see if the ceasefire leads anywhere. The combination of higher oil prices and increasing interest rates was just too much. The S&P closed the quarter down 4% and NASDAQ closed down 7%. For the first time in decades, the PEs for software stocks are lower than the market multiple. The group has been humbled. Private equity went on a buying binge of software companies. And now the private equity sector is buried in software. There is no question that every one of those transactions is underwater and probably buy a lot.
Hi, this is Steve Eisman, and welcome to another edition of The Weekly Wrap. This is for the week ending April 10, 2026, but recorded Thursday night, April 9 On this wrap, we will discuss the following. The War in Iran, 2 A short primer on reasons for private equities growth, 3 Some more bad news on private credit and some actual good news too, 4 A summary of the first quarter and an analysis of how various sectors performed, and finally, I will also address comments from 3 viewers. So let's get started. Iran news. Iran, of course, remains of paramount importance to the global markets. Over the weekend, President Trump threatened to blow up Iran's infrastructure and gave a deadline of Tuesday night. At the last minute, President Trump announced a two-week ceasefire and Iran pledged to reopen the Strait of Hormuz. On this news, oil prices collapsed, declining by over 15 percent and the S&P closed up 2.5 percent. We will see if the ceasefire leads anywhere. Vice President JD. Vance said Wednesday that the Iran ceasefire is a quote, fragile truce. Vance also said that Iran's foreign minister had responded well to the ceasefire, but others in the country had been lying about the agreement. Late Wednesday, Iran accused the US of violating the ceasefire and said that the Strait would remain closed. One early sticking point seems to be that the Iranians think that the ceasefire applies to Lebanon, and the US and Israel say it does not. Until the war is finally settled, I am sure the market will continue to trade headlines. Moving on. I don't speak about private equity as frequently as private credit, because private credit seems to be where all the risk is buried. Since private equity companies own many private credit funds, it is worth taking a detour today to look more closely at the huge growth in private equity. Since the great financial crisis, private equity has been one of the fastest growing asset classes. According to McKinsey, private equity was $4 trillion in 2016 and reached almost $9 trillion in 2025 Why has private equity grown so much? It's partially because of an intellectual disguise. Institutional investors care greatly about their Sharpe ratio. What's that? The Sharpe ratio is a financial metric that is used to evaluate an investment return relative to its risk. It calculates the excess return per unit of volatility. A high Sharpe ratio would be the result, for example, of strong returns coupled with low volatility. Every institutional investor covets that. Now, for many institutional investors, post great financial crisis, a great appeal of private equity is, ironically, its opacity. Investing in public markets provides a valuation every day. Investing in private equity appears to create smoother volatility because prices are given only on occasion. This allowed institutional investors to claim that they had greater Sharpe ratios than they did when they invested more in public markets pre-GFC. Some commentators call this volatility laundering. Now, it's totally true that the private equity strategy worked very well for many years by employing leverage during periods of low rates and financial repression. That private equity is also less volatile is just plain wrong. Just because you don't get a daily price does not mean that the asset class is less volatile. It just appears to be less volatile. And now, the private equity sector is buried in software. So much for the Sharpe ratio. Let's get back to private credit. Not a week goes by without new bad news from the world of private credit. At the end of last week, Blue Owl announced that it had received elevated redemption requests for two of its private credit funds for the first quarter of 2026 The firm's flagship OCIC, with about $36 billion in assets under management, received redemption requests of an astonishing 21.9 percent. Blue Owl's smaller tech-oriented fund OTIC, which is $3.3 billion in size, redeemed redemption requests of 41 percent during the same period. The firm cap redemption is at 5 percent. Wow. These redemption levels are unheard of. Also this week, Carlisle's flagship private credit fund, the Carlisle Tactical Private Credit Fund, CTAC, was $7 billion in assets, got a 16 percent redemption notice, but only honored the 5 percent cap. Also this week, Moody's moved the outlook on the Blue Owl OCIC fund to negative because of the high redemption requests. Moody's also changed its outlook for the entire BDC industry to negative, also because of elevated redemptions. This is typical of the ratings agencies who are notoriously slow to change their ratings. However, and this is very important, there was finally some good news in the world of private credit. Because of all the bad publicity, credit spreads have been widening, thereby making future private credit loans potentially more lucrative. Credit spreads widening is an indication of fear and stress in debt markets. When credit spreads get sufficiently wide, they can become attractive to investors. I will speak about this concept in much greater detail in a future Masterclass Lecture about debt and credit. On Tuesday, Blackstone announced that it closed a $10 billion dollar opportunistic credit fund. The company said the fund, called Blackstone Capital Opportunities Fund 5, was oversubscribed. This fund was sold only to institutional investors. In addition, Goldman announced that it had already lined up more than $10 billion in institutional commitments for a new direct lending drawdown fund in just a few weeks. Now, let's talk about the first quarter. The first quarter is over and earning season starts next week. So, it's a good time to take a step back and review what has happened. Which sectors and companies have done well and not so well, and what lessons can we learn? This was a tough quarter, but it did not start out that way. In January, the S&P was up a bit over 1%. Thereafter, the market began to wobble because of fears about the impact of AI on multiple sectors and also the potential for rising losses in private credit. There seemed to be daily stories on both of these issues. So, for example, Anthropic seemed to announce a new product almost daily, products that might impact insurance brokers, wealth managers, software, etc. Investors freaked out on every story. Bad news on private credit was an almost daily event, but those two risks were shunted off of the front page by the war in Iran. Before the war began, the 10-year was at 3.95% and oil prices were around $70. Oil prices jumped above $100 and that created fear that inflation was just around the corner. Now, normally, in times of stress, investors buy treasuries, but not this time. The 10-year got as high as 4.4%. The combination of higher oil prices and increasing interest rates was just too much. The S&P closed the quarter down 4% and NASDAQ closed down 7%. One more point about the relationship between interest rates and the equity markets. Over the last four years, 4.5% on the 10-year has proven to be an important boundary for equity performance. Once the 10-year breaches 4.5%, the market tends to sell off. We got close. So if the war lasts much longer and oil prices climb up further, that barrier could be breached. Now, let's turn to how the various sectors performed. The S&P 500 is divided into 11 sectors. In the table I'm putting on the screen, I show how each of the sectors performed during the first quarter of 2026 Now I'll also recite the statistics right now, because many viewers are audio only. 6 out of 11 sectors were up during the quarter. Energy up 37%. Material 9%. Utilities 8%. Consumer staples 7%. Industrials 4%. And real estate 2%. The remaining 5 sectors were all down. Healthcare down 5%.