Traders, Guns and Money

The S&P 500, Nasdaq Composite and Dow Jones Industrial Average all ended the week lower by -0.4%, -1.0% and
-1.3%, respectively, while gold (+3.2%), Brent crude (+2.7%) and U.S. Treasuries rallied into the weekend. The trading week was defined by Citrini Research’s report on AI disruption, Nvidia earnings beat[JR1] , more cracks in private credit and Iran. Over the weekend, the United States and Israel launched a coordinated military campaign targeting critical assets across Iran. This operation resulted in the successful removal of Supreme Leader Ayatollah Ali Khamenei from power, leading to a significant power vacuum at the highest levels of the Iranian government.

Last Monday a relatively unknown Substack contributor, Citrini Research, went viral after publishing “The 2028 Global Intelligence Crisis,” a research report detailing a gloomy AI tail-risk narrative set in the year 2028. The report covers how AI agents, currently viewed as a future productivity enhancer, will ultimately lead to the decline of Western civilization by first disrupting the real economy followed by a financial and government calamity.

The long-form narrative is centered around a dystopian future based on ”Ghost GDP”—AI-generated output that raises productivity and national output but depresses consumption through displacement of white-collar workers. The report explicitly referenced companies that AI agents would disrupt, including IBM, Uber, Zendesk, Apollo and Blue Owl, among others. While the piece was broadly dismissed as a work of fiction catastrophizing AI, it captured a significant audience and sparked a continuation of this year’s selloff in software, lending and technology names.

Wednesday was centered around Nvidia’s earnings, as the king of compute[JR2]  released another quarter of better-than-expected numbers and elevated guidance. Revenues of $68.1 billion and earnings of $1.76/share represented a year-over-year increase of +73% and +82%, respectively. However, Nvidia failed to hold its key $200 resistance level, dropping Thursday by -5.5% for its worst single-day performance in 10 months.

Banks sold off in tandem with their private-credit peers this week due to a UBS credit report that raised default forecasts and news of another high-profile bankruptcy. UBS analysts hiked their projected default expectations for private credit to 15%, up from 13% a month earlier, referencing aggressive AI disruption and overexposure to software firms. The report expanded further to include high-yield and leveraged loans markets, raising worst-case default rates to 10% and 6%, respectively. Jamie Dimon, CEO of JP Morgan Chase, drew parallels this week between the current private credit “growth at all costs” mantra with pre-2008 mortgage-backed securities exuberance, further depressing sentiment. 

On Wednesday, a London-based mortgage lender, Market Financial Solutions Ltd., went bankrupt. Barclays, Jefferies, Banco Santander, Wells Fargo and Apollo Global Management were among the banks and alternative asset managers exposed. The initial autopsy revealed severe double-pledging of collateral along with what appears to be outright fraud, once again bringing into question due diligence and lending practices at some of the world’s largest financial institutions. Bankruptcy courts projected a £930 million collateral shortfall within the failed lender’s £2.5 billion loan book, with Barclays (£600 million) and Apollo (£400 million) bearing most of the exposure.

Netflix officially bowed out from its highly publicized bidding war for Warner Bros. Discovery Thursday after failing to provide a counteroffer to Paramount Skydance’s ~$110 billion bid. Shares of Netflix rose 13% Friday as investors priced out potential regulatory, political and financing risks of the deal, proving that sometimes the best deal is no deal.

Notable economic releases last week included the Producer Price Index (PPI) for January, which showed a higher-than-expected +0.5% increase month-over-month versus the +0.3% consensus. Service prices increased by +0.8%, the highest since July 2025, while prices for goods declined -0.3%.

Over the weekend, the United States and Israel executed a joint military operation, striking strategic assets across Iran and killing Supreme Leader Ayatollah Ali Khamenei. The Iranian regime responded in kind by striking both civilian and military targets across neighboring countries believed to be aiding in the attack, putting regional allies Dubai, Qatar, Saudi Arabia and The United Arab Emirates on high alert.

Critical oil infrastructure is also being targeted by Iran, with reports of multiple oil and chemical tankers being hit while navigating the Strait of Hormuz. While damage to critical oil and gas infrastructure has yet to be reported, at least 150 tankers in the Persian Gulf are currently anchored in place amid Iranian threats of attack. Iraq has also halted all oil production as a precautionary measure, with the possibility of other OPEC+ countries following suit.

Research by Goldman Sachs now projects a +$18 risk premium to crude oil, corresponding to its base case of a six-week shipping halt through the Strait of Hormuz. The research also sees significant upside risk to natural gas, projecting a possible +130% increase in European markets to roughly $25 per million British thermal units (MMBtu) under the same six-week shipping halt scenario.

What to Watch This Week: The ongoing conflict in the Middle East will be the catalyst for the week. Friday will also be important as February non-farm payrolls, retail sales and the unemployment rate will be released before the open. Notable earnings for this week include Progressive Corp. on Monday, Autozone, Target, Crowdstrike and Ross Stores Tuesday, Broadcom Wednesday, and Costco Thursday.

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