Are markets misreading the Iran news?… the households that can't absorb $100 oil… private credit stress spreads beyond software… and what to do now VIEW IN BROWSER As I write on Tuesday, markets are surging on war news – but the logic behind this rally deserves a closer look… This morning, the Wall Street Journal reported that President Trump has told aides he’s willing to end the U.S. military campaign against Iran even if the Strait of Hormuz remains largely closed. Stocks jumped on the headline, reading "end of war" and buying first, asking questions later. But this rally is ignoring a critical detail… Roughly 20% of the world’s seaborne oil passes through the Strait every single day. So, if Iran remains in control of that chokepoint when the guns go quiet, has our energy problem really been solved? While Wall Street seems to be whistling past this issue, the oil patch isn’t – and the spread between the oil benchmarks, WTIC in the U.S. and Brent in Europe, tells the real story. As I write, WTIC is slightly down on the day while Brent has surged 5%. The gap between them is roughly $15 a barrel, which is near an 11-year high. That spread reflects how much more exposed European supply is to a closed Strait than U.S. crude. Oil industry executives and analysts warn the Strait of Hormuz needs to be reopened by mid-April or supply disruptions will get significantly worse – and that even then, enough damage may have been done to leave energy prices higher for longer. Now, as we’re going to press, Axios is reporting that China and Pakistan have presented a new plan for ending the war that includes an immediate ceasefire and the reopening of the strait. We’ll keep tracking this as new details emerge, but it’s encouraging – and markets are applauding. So, what does this mean for investors? Wall Street is trying to price in the end of active hostilities. That may well happen – and if it does, a relief rally is justified. But the deeper energy problem doesn’t resolve on ceasefire day, especially if Iran remains in control of the Strait. So, while Wall Street appears to be asking “which stocks should I buy?” we’re mulling a different question… If Trump ends hostilities with the Strait closed, where do oil prices settle as we move into the summer driving season? And what will that mean for inflation, Main Street budgets, and the Fed? We’ll keep tracking this. | Recommended Link | | | | When the people with the best information about where the economy is going choose another type of currency over dollars, a 47-year market veteran says that’s worth a second look. Louis Navellier has documented the pattern — and identified the key steps you should take right now. See What He Found → |  | | Today’s energy shock isn’t landing on households that are in good financial shape Here’s the uncomfortable context around the recent oil surge… The pain at the pump isn’t hitting families with cash reserves and low debt. It’s hitting families already stretched to their limits – and the data tells that story clearly. New figures from J.D. Power and Edmunds put some striking numbers on the table. An estimated 30.5% of car buyers with a trade-in now owe more on their current vehicle than it’s worth – what’s known as being "underwater." The average amount owed on these underwater trade-ins hit $7,214 in Q4 2025, an all-time high. And 27% of those trade-ins carried more than $10,000 in negative equity – also a record. Here’s Edmunds consumer insights analyst Joseph Yoon: While these levels of negative equity are nothing new… it’s the amount underwater that is the real, and troubling, story. When you trade in a car with negative equity, that remaining balance doesn’t disappear. It gets rolled into your new loan. The average monthly payment for buyers who did exactly that reached $916 in Q4 2025 – that’s $144 more than the average new-car payment for buyers without negative equity. And 40.7% of those negative equity trade-ins are now financed on 84-month loans. That’s seven years to pay off a vehicle that will likely be worth a fraction of its purchase price long before the loan is done. Now throw in the possibility we covered in yesterday’s Digest – that the Fed’s next move is a rate hike, not a cut – and the picture darkens further. Borrowers already carrying heavy auto debt don’t get a lifeline in that environment… and that pressure must land somewhere – which puts lenders on watch. The largest independent auto lender in the country, Ally Financial (ALLY), sits directly in the middle of all of this, with more than 70% of its $83.9 billion loan book in consumer auto. To be fair, ALLY has been tightening its underwriting standards. But its Q1 2026 earnings on April 17 will be the first real window into how this consumer stress is affecting its numbers. If delinquency trends deteriorate further, it would be a meaningful signal – not just for ALLY, but for the broader consumer credit picture. Bottom line: The auto loan data isn’t a crisis today – it’s a pressure gauge. But right now, the pressure is rising. The same pressure is showing up in a corner of the market most investors aren’t watching We’ve spent several recent Digests tracking the stress building inside private credit, covering the AI software angle. But recent data from Fitch Ratings suggests this isn’t just a software issue… The problem is spreading. According to Fitch, the overall private credit default rate climbed to 5.8% for the trailing 12 months through January 2026 – the highest since the agency began tracking it. But the sector leading in defaults isn’t software… It’s healthcare. Healthcare service providers recorded the highest number of unique defaulters in private credit over that period. The playbook that got them here is familiar… Over the past decade, private equity firms loaded dental chains, veterinary clinics and behavioral health networks with debt using the same leveraged buyout strategy they applied to software companies. The pitch was identical: sticky recurring revenue and a fragmented market that was ripe for consolidation. But the cash flows aren’t holding up. Cuts in Medicaid reimbursement, staffing cost inflation, and the operational complexity of rolling up thousands of small practices have crushed the margins that were supposed to service all that debt. Many of these companies have already seen their interest coverage ratios fall below 1.0x – translation, they’re no longer generating enough cash to cover even the interest on their loans. Here’s William Barrett, managing partner at Reach Capital, speaking to CNBC: “Funds concentrated in volatile sectors or holding covenant-lite loans with weaker protections are also vulnerable, as are highly leveraged healthcare roll-ups… certain smaller issuers have recently recorded a 10.9% default rate, due to a lack of resources to absorb shocks.” Morgan Stanley’s 2026 private credit outlook independently echoes that concern – the firm notes it maintains a significant underweight to healthcare, which has led all sectors in loans placed on non-accrual status over the past year. By the way, healthcare isn’t the only sector flashing red. According to the same Fitch data, consumer products recorded the second-highest default rate, more than doubling over the past year from 6.1% to 12.8%. That’s the institutional echo of the kitchen-table stress we described in our story on trade-ins being underwater. Bottom line: stress in the private credit market isn’t limited to just one corner. Software is a big problem, but healthcare and consumer products are widening that problem. We’ve been tracking this alongside legendary investor Louis Navellier, editor of Breakthrough Stocks Louis has been warning about private credit stress since mid-2024, and his concern has grown considerably as the default data has accumulated. It’s a subject he knows from the inside – early in his career, he worked as a banking analyst during the savings and loan crisis of the 1980s, watching firsthand how financial problems build long before they become headlines. That experience shapes how he reads what’s happening today: Financial crises do not start when the headlines hit. They start months earlier. Sometimes years. The first cracks show up quietly. Loans stop performing the way they should. Cash flows weaken. Institutions start adjusting their exposure. And most investors do not notice until the story is already much bigger. He’s been watching those early cracks form in private credit for over a year. And now he’s flagging a specific date that most investors haven’t circled yet: June 30, 2026. As I detailed yesterday, that’s the deadline when Business Development Companies (BDCs) and private credit funds must report their semiannual results – and for the first time in this cycle, put honest marks on their loan portfolios. What these assets are actually worth will become public record. If the stress building beneath the surface is as significant as the early data suggests – and the Fitch numbers above indicate it is – June 30 could be the moment hidden losses become visible ones, with real consequences for markets. Louis isn’t just warning investors. He’s also identified specific steps to both protect your portfolio and potentially profit as this story develops. He’s put together a full presentation laying out what he’s seeing – and where he believes the opportunities are on the other side of it. Click here to watch Louis’ presentation before this story gets bigger. Coming full circle, today’s Digest tells one story from three angles We have an oil market pricing in peace while ignoring who still controls the strait… households rolling record negative equity into seven-year car loans… and a $3 trillion private credit market where defaults are spreading well beyond where they started. These aren’t separate stories. They’re different readings of the same pressure gauge – a financial system built for low rates, cheap credit, and steady growth that is now being stress-tested on multiple fronts at once. One of these stories is already flashing red. The other two are still building quietly in the background – which is exactly how Louis would tell you the dangerous ones always start. The cracks appear small and contained…until they don’t. We’ll keep tracking all of this with you here in the Digest. Have a good evening, Jeff Remsburg | 
