To The Moon

February 2026 was rough for stocks. After riding high on AI hype for years, the S&P 500 dipped noticeably, closing out the month a bit below its recent peaks. The Nasdaq took an even bigger hit, marking its third down month in four. The main culprits? Two big, interconnected worries that people are calling the "private credit cockroaches" and the "AI scare trade."Let's break it down in plain terms.The Cockroach Thing in Private CreditJamie Dimon from JPMorgan kicked this off late last year when a couple of borrowers — like a subprime auto lender and an auto-parts company — ran into serious trouble. He basically said, "When you see one cockroach, there are probably more hiding." It's a classic way of warning that one visible problem often signals bigger, hidden ones.

Fast forward to February, and those fears flared up again. A UK mortgage lender called Market Financial Solutions collapsed, dragging some Wall Street names into the mess. Then you had Apollo tweaking a dividend on one of its private-credit funds and marking down some loan values. Blue Owl Capital limited withdrawals from a fund and had to sell off a chunk of assets, including software-related loans. All of this spooked people because private credit — basically non-bank lenders handing out big loans — has ballooned to $2–3 trillion since the financial crisis. A lot of that money went to software and services companies, which are now looking vulnerable.The worry is simple: opaque deals, high leverage, and not much transparency mean trouble can spread fast once one loan goes bad. Banks aren't directly in the thick of it, but they have ties through things like collateralized loan obligations, so financial stocks got hammered. The KBW Bank Index dropped sharply, with every stock in it finishing the month in the red on the last trading day.

The AI Scare Trade Takes OverFor a while, anything tagged "AI" was a rocket. Now the story's flipped. The "scare trade" is the fear that AI isn't just going to make things more efficient — it's going to wipe out jobs and entire business models in white-collar fields.Triggers piled up: new AI tools automating research, legal work, insurance quotes, wealth management tasks, you name it. A viral report floated a scary 2028 scenario with massive job losses and no quick replacement. Software companies, trucking firms, and more saw shares tank on disruption fears. Even some big tech names felt the chill as money rotated away from anything that looks "legacy."The pain spread to asset managers, commercial real estate, cybersecurity, payments — basically anywhere AI could theoretically eat into profits or headcount.Why These Two Are Hitting TogetherThey're linked. Private-credit funds poured money into software borrowers during the cheap-money years. Now AI is squeezing those companies' pricing power and margins, making those loans look riskier. One bad loan shows up, panic sets in about the rest. Credit spreads widened a bit, Treasury yields dipped, and safe-haven stuff like gold jumped. Throw in some hotter inflation data and tariff/geopolitical noise, and you had a classic risk-off mood.What to Expect Moving ForwardVolatility is probably sticking around for a bit. Earnings season is wrapping up, but fresh AI headlines — especially from big tech spenders — or any new private-credit blowups/redemptions will keep things choppy. Expect money to keep rotating: out of growth/tech/financials and into more defensive spots like consumer staples, energy, materials, or bonds.The private-credit stuff looks messy but probably won't turn into a full-blown crisis like 2008. Most of these issues seem contained so far, though keep an eye on the big players like Blue Owl, Apollo, and smaller business development companies.The AI scare has real legs — disruption is coming — but it's also overdone in places. Panic-selling has created bargains in solid companies that are actually using AI well or have strong moats. The long-term productivity story from AI hasn't gone away; we're just pricing in the painful transition.Overall, the broader market is still only modestly off highs, backed by decent corporate balance sheets and steady consumer spending. A 5–10% pullback would actually be normal after such a long run with narrow leadership. Upside could come from cooling inflation giving the Fed room to maneuver, or proof that AI investments are paying off. Downside risks are a real credit event or bad jobs numbers signaling recession.Bottom line: this isn't the end of the bull run — it's a healthy (if painful) reset. Risk is getting re-priced, and that's creating opportunities if you're patient. Don't dump everything "AI-adjacent" or credit-exposed in a panic. Use the dips to upgrade toward high-quality names with strong cash flow, reasonable valuations, and real AI resilience.The cockroaches are scurrying, the AI fears are loud, but markets have handled bigger scares. Stay diversified, keep some cash handy, and remember: every freak-out usually plants the seeds for the next leg up.