Q1 POST-MORTEM
Here is what actually happened in Q1.
The S&P 500 finished down 4.6% for the quarter, which is the index's worst first quarter since 2020. That would be mildly uncomfortable under normal circumstances. These are not normal circumstances. The index fell to its lowest point since August 2025 on the back of the biggest one-month surge in crude oil prices in more than four decades. Brent peaked at $126 a barrel. The IEA called the Strait of Hormuz closure the largest supply disruption in the history of the global oil market — and they used those words carefully, because they are not an organization that reaches for superlatives. Consumer sentiment collapsed to 53.3 on the University of Michigan index, the third-lowest reading ever recorded. Lower than 2008. Lower than the months preceding every recession since 1980.
But here is the part worth dwelling on, because it is the part that will matter most for what comes next.
Private credit is cracking.
Blue Owl Capital — one of the biggest names in the space — capped redemptions at 5% after experiencing increased withdrawal requests in two of its flagship private credit funds. Read that again slowly. A firm that has spent the better part of three years marketing the structural beauty of illiquidity premiums and long-duration income to retail investors is now telling those same investors they cannot have their money back at the pace they would like. The fund worked exactly as designed. The problem is that "exactly as designed" is a sentence that sounds very different to a retiree in Phoenix filling her tank at $4.02 a gallon than it does in a pitch deck.
This is not an isolated incident. It is the first audible creak in a structure that has been built with extraordinary speed and marketed with extraordinary confidence to a class of investors who did not fully understand what they were buying. The private credit boom of the last five years was predicated on a specific environmental assumption: that rates would eventually fall, that liquidity needs would be modest, and that the real economy would remain cooperative enough to service the debt. Two of those three assumptions are now under active threat. Rates are stuck. The economy is slowing into an oil shock. And when retail investors — who were given access to private credit vehicles as a gift from the democratization-of-finance movement — decide simultaneously that they would prefer liquid assets in an illiquid world, the math of gating becomes inevitable.
The $3 trillion AI data center build-out is borrowing heavily from these same private markets. That story has not been stress-tested yet. It will be.
Meanwhile, Tesla delivered 358,023 vehicles in Q1 2026 — a 6% year-over-year gain that nonetheless missed Wall Street's consensus, fell sharply from Q4's 418,000, and sent shares down more than 5% on Thursday. The stock's bulls absorbed this as a speed bump on the road to full self-driving and Optimus robots. The stock's detractors noted that U.S. sales have been in structural decline since the federal EV tax credit expired at the end of Q3 last year, that European sales remain troubled despite a February bounce, and that the core automotive business is decelerating in real time while the market prices in a future that has been perpetually six to twelve months away. SpaceX confidentially filing for an IPO at a $1.75 trillion valuation — an event the bulls are treating as a Musk ecosystem catalyst — is a separate company, a fact that occasionally gets lost in the enthusiasm.
Nike reported earnings this week and forecasted revenue declines of 2–4% in the fiscal fourth quarter, extending losses deeper into the year. The stock hit its lowest intraday price since 2015. Down 28% year-to-date. A consumer staple of American retail culture is telling you, in plain language, that the American consumer is not feeling good. Diesel at $5.45 a gallon does not stay in the gas station. It moves through every supply chain that has ever put a sneaker in a box.
Back to the week's dominant absurdity. On Tuesday and Wednesday, equities staged their best two-day rally since last spring. The S&P ended the week up 3.4%. The Nasdaq soared 4.4%. The catalyst: Iranian state media signaling that Iran and Oman were drafting a protocol to "monitor" traffic through the Strait of Hormuz. Not reopen it. Monitor it. The Dow came back from a 668-point intraday loss to go briefly positive on the back of a sentence about monitoring a shipping lane.
The rally is not irrational on its own terms. Markets are forward-looking, and the resolution trade is a legitimate one. If the Strait reopens by mid-April, crude falls, margins recover, and the recession that everyone is quietly underwriting in their base case fails to materialize. That is genuinely possible. Oil analysts and executives are saying the window closes fast — that mid-April is roughly the deadline before physical shortages move beyond logistics into production damage that takes months to unwind. Trump said the war would last "two to three more weeks" and that Hormuz would open "naturally." He also said, in an April 1st address with no trace of irony, that the U.S. might bomb Iran's electricity infrastructure. Markets processed both statements and chose the optimistic interpretation.
The week ahead brings CPI on Friday, PCE on Thursday, and FOMC minutes on Wednesday. The data corridor is loaded. The Fed meets on April 29th and has done nothing since the war started except hold at 3.5–3.75% and speak in careful, layered sentences about the distinction between transitory supply shocks and entrenched inflation expectations. Jerome Powell's term ends in May. His successor has not been confirmed. The institution that is supposed to be the adult in the room is between chairmen while navigating the most complex monetary policy environment since the 1970s.
So. Monday's call.
We will acknowledge that Q1 was difficult. We will note that the labor market showed resilience in March — 178,000 jobs, well above expectations, though the data predates the sharpest phase of the energy shock. We will say that the situation remains fluid and that we are monitoring developments closely.
What we will not say is that we have any particular confidence in what happens next.
The views in this document reflect the moment of writing and will be wrong in ways that are not yet apparent. That is, historically speaking, the only guarantee on offer.