by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens by highlighting the ongoing controversy around private credit, including offering the differing outlooks for the asset class. We then provide another update on the Iran conflict. In addition, we examine a recent legal setback for social media companies and outline mounting economic concerns in Argentina. As always, we include a summary of recent US and international economic data releases.

Private Credit: While recent headlines have taken a dim view of private credit, we think the outlook is more constructive than many acknowledge. On Wednesday, Lloyd Blankfein cautioned that a single shock could prompt these lenders to reassess the value of their holdings, potentially forcing substantial markdowns after a run of failed portfolio sales. His remarks come after several firms were unable to find buyers for slices of their private asset books. However, there is more to the story than Blankfein suggests.

• The concerns are being driven by several prominent private credit firms which in February posted their weakest performances since 2022. The weakness reflects mounting scrutiny over the valuation of software‑as‑a‑service (SaaS) firms, as AI tools from Claude and others can perform comparable functions at lower costs. This threatens SaaS companies, which account for roughly one‑fifth of these lenders’ balance sheets. In response, some firms have imposed limits on client withdrawals to contain the fallout.
• A key concern for the software sector is the looming “maturity wall,” as a large wave of loans are coming due in 2027 and 2028. Many of these facilities are highly levered, making their capital structures a growing focus for investors. In response, software firms are working to demonstrate the durability of their business models — some by moving quickly to showcase sustainable profitability, others by refinancing to bolster valuations and strengthen balance sheets.
• That said, the situation may not be as dire as it is being portrayed. While major private credit firms have faced some pushback, many of the big names still outperformed the broader leveraged loan market in February. This outperformance signals that the risk to these credit funds has less to do with perceived default risk and more to do with going concern risk. In short, much of the decline in valuation stems less from present day performance and more from future earnings expectations.
• It is also worth noting that while many software companies may be in danger, AI also presents opportunities for them to pivot. Over the last few months, several software companies have begun reshaping their business models to more closely resemble AI agents, which has helped improve their outlook. One company that has been able to make this transition is Salesforce, which has shifted its software-as-a-service model to more of a service-as-software approach.
• While there is plenty of doom and gloom around AI and private credit, it is worth remembering that we are still in the early stages of both trends. That leaves time for weaker companies to adapt and potentially stage a comeback. In our view, the risks in private credit are real but likely less severe than the most alarmist headlines imply. This is a sector to watch closely but not one that should trigger outright panic.

Push to the End: The US is continuing to push for an end to its conflict with Iran by any means necessary. On Wednesday, Tehran rejected the White House’s 15‑point ceasefire proposal, which was conveyed via intermediaries including Pakistan. In response, Iran tabled its own five‑point set of conditions, which includes demands for reparations and formal recognition of its authority over the Strait of Hormuz — a proposal likely to meet the same fate. Washington, meanwhile, has intensified its military campaign even as indirect contacts persist.

• Tehran’s rejection of recent US overtures has drawn a sharp rebuke from President Trump, who is now calling for a more decisive international response. The president warned that Iran must engage seriously before “time runs out.” His remarks come as the White House signals that it is preparing for what officials are describing as a potentially decisive phase of the campaign, with options under discussion reportedly ranging from strikes on critical infrastructure, including power facilities, to the possible deployment of ground forces.
• The White House has already begun preparing for the potential economic fallout of a broader conflict. On Wednesday, the Pentagon announced that it has raised the maximum enlistment age for active‑duty service to 42 and is reportedly considering reallocating weapons systems originally designated for Ukraine to support US operations in the Middle East. Additionally, officials are running contingency scenarios for a spike in crude prices to $200 per barrel.
• What happens next is likely to carry significant repercussions for the global economy, given the potential to reshape the balance of power in the Middle East. A resulting power vacuum could fuel a more protracted conflict, particularly if the US is unable to secure meaningful cooperation from regional leaders in an effort to restore stability. While this remains a worst‑case scenario, it would also imply heightened volatility in energy markets.

Social Media Loses: Meta and Google suffered a major legal defeat over the impact of social media on mental health. A court ruled on Wednesday that their platforms created conditions that made them addictive for young users, leaving the companies liable for resulting harm. The decision marks a significant setback, raising the possibility that social media could be treated as a public health risk and subjected to stricter regulation, potentially on a scale comparable to tobacco.

Argentina Slowdown: Milei’s economic agenda appears to be running into headwinds as the broader economy softens. While his plan has centered on cutting spending to improve Argentina’s fiscal position, the strain now seems to be emerging on the revenue side. In recent months, overall growth has slowed and tax receipts have struggled to keep pace with inflation. This slowdown has raised concerns that he may need to alter policy to keep his agenda on track.

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