To The Moon

$SPDR S&P 500 ETF Trust(SPY)$ $Blackstone Secured Lending Fund(BXSL)$ $Blue Owl Capital Corporation(OBDC)$ 📊🔥💰 S&P vs Private Credit: The Hidden Liquidity Rift 😏📈🟠

Setting the Scene

The S&P 500 closed at 6,791.69 on 24 Oct 2025, up 22 percent year to date as mega caps and AI optimism pushed it to record highs. Beneath that surface, private credit leaders show strain. Blackstone Secured Lending (BXSL) finished at $26.80, down about 8 percent YTD; Ares Capital (ARCC) at $20.08, off roughly 9 percent; and Blue Owl Capital (OBDC) at $13.03, down about 12 percent. The chart captures a growing gap between public market exuberance and private credit fatigue.

Liquidity Cracks Beneath the Rally

Private credit has ballooned into a US $2 trillion plus asset class since 2020. That growth, fuelled by yield hungry institutions, concentrates exposure in floating rate, highly leveraged loans that lack daily price discovery. With the Fed holding rates near 4.25 – 4.50 percent and SOFR around 4.3 percent, borrower coverage ratios are tightening while a refinancing wall looms for 2025 to 2027. Analysts warn that opaque valuations can mask stress until defaults surface.

Technical Patterns to Watch

The S&P’s trend from December 2022 remains intact, pressing the 6,700 zone with RSI near 68 and ETF flows approaching $950 billion for the year. BXSL has slipped below its 200 day SMA after peaking above $32 in early 2024, while ARCC and OBDC trace similar descending channels. These patterns typically precede mean reversion when liquidity cycles shift.

Macro Pressure Points

Core PCE inflation still hovers around 3.3 percent, limiting how quickly the Fed can ease. The April 2025 tariff round (10 percent baseline; higher for select imports) has lifted input costs for manufacturers by roughly 5 to 7 percent, affecting about 40 percent of private credit portfolios with industrial exposure. China’s property slump and European stagnation compound the strain on mid market exporters that anchor many lending books.

Earnings Stress Emerging

Recent lender updates paint a cautious picture. Ares Capital’s Q2 materials noted higher provisions and tighter spreads but did not show systemic defaults. BXSL reported non accruals of only 0.1 percent at fair value, well below alarm levels. OBDC posted adjusted NII of $0.40 per share and non accruals around 0.7 percent of fair value. Fitch’s latest private credit default rate near 5 percent confirms rising risk but not panic.

Positioning and Strategy

Past cycles suggest divergences like this resolve within three to six months. Either credit stabilises as policy eases, or equities correct to acknowledge funding stress. I remain tactically balanced: maintaining equity exposure above the 6,400 support zone and tracking BXSL and ARCC for a floor around $25 and $19 respectively. Cross asset mean reversion is my base case into early 2026.

The Key Question

Is this a temporary valuation disconnect that fades once rates fall, or the early phase of an equity re rating triggered by private credit stress? Share your take; does liquidity recover or reprice?

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