23.02.26 - Tariff and private credit concerns

The US Supreme Court’s decision to strike down key Trump-era tariffs briefly raised hopes for relief. However, the relief was short-lived: President Trump quickly reinstated broad-based global tariffs – first at 10%, then raised to 15% over the weekend via alternative legal channels.

At the same time, stress signals are emerging in private credit. Blue Owl sold around USD 1.4bn of loan assets from three private debt funds, while curbing liquidity payments to investors. Blue Owl is a leading asset management firm offering alternative investment solutions in private credit.
This highlights growing concerns that years of ultra-low rates and compressed spreads have encouraged excessive risk-taking across parts of the private credit universe. Liquidity mismatches could become the weak spot if market stress intensifies.

Markets:

• Equities: clearly lower led by US Tech down around 1.2%

• Bonds: US yields slightly lower after Friday’s spike(US 10y ~4.03%)

• Currencies: USD weakened markedly

• Commodities: Precious metals extended their rally
  – Gold ~USD 5’230/oz (+2.4%)
  – Silver ~USD 88.5/oz (+4.7%)

• Cryptos: Sharp sell-off, Bitcoin back near USD 64k

• Volatility: VIX jumped to 21

My View: What happens next remains unclear. Refunds of already paid tariffs, corporate reclaim mechanisms and the fiscal implications for the US Treasury are unresolved. This legal and political fog adds yet another layer of uncertainty for corporates, supply chains and markets.

Markets are slowly starting to internalize that the current environment is fundamentally different from the easy “buy-the-dip” regime of recent years. This reallocation process does not happen in one session – positioning typically adjusts over several days or even weeks.

On Friday, I outlined the expected market reaction to renewed tariff uncertainty:

• Weaker USD ✅

• Higher US yields ❌ (only briefly on Friday)

• Fragile risk assets (equities & cryptos lower) ✅

• Precious metals higher ✅

• Volatility rising ✅

The initial positive market reaction was for me hard to reconcile with the underlying fundamentals and unresolved risks. The market reversal after the weekend suggests that investors are now reassessing the situation more realistically, broadly in line with my initial assessment and underlying analysis as they have largely played out as expected..

The broader picture remains unchanged: uncertainty is not diminishing – it is increasing. Tariff policy chaos, legal uncertainty, fiscal concerns and emerging cracks in private credit form a fragile cocktail.

Should negative momentum accelerate, a faster and more disorderly unwind of risk assets cannot be ruled out.

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