Private credit was hot, and now it's not. That has some parts of the financial world on edge.

Why it matters: A few trends — the AI scare trade and the retail investing boom — are colliding at once and stressing a trillion-dollar-plus piece of the economy.

State of play: Last week, everyone was talking about one private credit firm called Blue Owl Capital.

• Facing high demand from investors in one of its funds to get their money back, Blue Owl sold off assets. The firm also changed the way redemptions at the fund operate, setting off alarm bells.

How it works: Asset managers like Blue Owl, as well as better-known firms like Blackstone and KKR, take in money from investors to create funds which typically lend to mid-market businesses, like smaller nonpublic companies that don't issue high-grade bonds.

• That investor money gets locked up for a while. Historically, that was OK because investors were often deep-pocketed institutional types, insurance companies or pension funds not apt to need to cash out very often.

Friction point: The dynamic started shifting about five years ago when retail stock investing started booming, and everyone seemingly had a Robinhood account and a stock strategy.

• Private capital managers wanted in. They started marketing to individual investors in a big way and started talking about the democratization of investments.

The big picture: It's a concerning moment. Nonbank lending started growing in the wake of the 2008 financial crisis, picking up a business the banks were retreating from, and ballooning out from there.

• Private credit hasn't been tested since then by any kind of prolonged economic slowdown.

Where it stands: Now, like so many other corners of the economy, private credit is under AI stress. Firms including Blue Owl lent to software and IT businesses.

• Those tech companies are seeing their valuations plummet on fears that AI could put them out of business.

Threat level: The thing with private credit is that it's…private, "like banks without bank regulations," writes Mark Malek, chief investment officer at Muriel Siebert.

• But you can't just take your money and go, as you can with banks.

Zoom in: Previously, Blue Owl offered quarterly redemptions of up to 5% of the value of the fund, increasingly a problem since investors wanted more.

• Moving forward, the firm said it would make regular payouts, but on its schedule. The company's head of credit put it this way: "We're not halting redemptions, we're just changing the form."
• Investors still found this alarming.

Reality check: Because funds limit redemption requests, the risk of something akin to a bank run is minimal.

• "The danger emerges when expectations and structure collide," Malek says. "If an investor treats a semi-liquid private credit fund like a money market account, disappointment is almost guaranteed."

For close observers of the Supreme Court, the 6-3 ruling overturning President Trump's signature tariff policy Friday wasn't such a surprise.

• Under Chief Justice John Roberts, the conservative court has been overwhelmingly pro-business, research has shown.
• And, the U.S. shrimp industry notwithstanding, most businesses hated the tariffs. They were a frequent target of the Wall Street Journal editorial page. The Chamber of Commerce filed a brief with the court siding against the White House.

Flashback: A paper released in 2022 found that under Roberts, this Supreme Court is the most pro-business court "in a century."

• It has sided with business in cases involving a nonbusiness 63% on average in the years examined. Historically, that number had been 41%.
• The pro-business slant isn't just a matter of more Republican-appointed justices. Judges appointed by Democrats lean that way, too.

Zoom in: The paper's coauthor, Lee Epstein, a professor at Washington University in St. Louis, told Axios over the weekend she thinks the ruling aligns with their findings.

Where it stands: Just how attuned to markets is this court? Last week, the Supreme Court announced that litigants will soon be required to include company stock tickers in court documents.

• The aim is to help the justices figure out if they have a conflict of interest in the case.

The latest: Trump's loss isn't the end of his tariff regime. Over the weekend the president said he would increase global tariffs to 15%.

Follow the money: The ruling, meanwhile, said nothing about refunds — and companies are scrambling to figure out what to do, as the Wall Street Journal reported Saturday.

• U.S. trading partners are confused: "Nobody can make sense of it anymore — only unanswered questions and growing uncertainty for the EU and other US trading partners," Bernd Lange, the chief trade lawmaker in the European Parliament, posted on X yesterday.

The bottom line: That is not the closure the business community craved.

• "In short, trade uncertainty is not fading; it is merely shifting form," economist Bob Schwartz of Oxford Economics writes.

What to watch: The tariff decision was the first time in Trump's second term that the court definitively pushed back on one of the president's policies.

• The next time could be another business-aligned case: The court is expected to rule shortly on the president's attempt to fire Fed governor Lisa Cook.

Etsy appeared to be the big stock winner of the tariff ruling, as the digital marketplace company's share price closed up 8.4% on Friday.

• The stock is higher than it was before "Liberation Day" clobbered retail.
• Investors weren't just reacting to the Supreme Court ruling. The company's sale of second-hand clothing app Depop to eBay was greeted positively by analysts, a sign Etsy is turning back to its core business.

🏦 White House economic adviser Kevin Hassett regrets saying New York Fed researchers should be "disciplined." (Laurence Kotlikoff)

😴 Investment bank Centerview Partners agreed to settle a lawsuit filed by an analyst who said she was unfairly fired because she couldn't work around the clock. (Wall Street Journal)

😇 HALO is the new acronym for stocks investors think have high odds of surviving the AI revolution. Coined by Ritholtz Wealth Management's Josh Brown, it stands for "heavy assets, low obsolescence." (Wall Street Journal)