Remember when tariffs were guaranteed to destroy the U.S. economy?
Headlines screamed it in 2024 and early 2025. Economists warned of stagflation every day. Many reactive Wall Street analysts slashed forecasts. TV pundits declared the beginning of the end for the U.S. economy.
I remember it like it was yesterday. My bet is you do, too.
It sounded convincing. It generated plenty of clicks and views. And it triggered exactly the wrong reaction from too many investors. They panicked when they should have been opportunistic. They sold when they should have been looking for bargains.
In today’s edition of the Wide Moat Daily, I won’t just explain what really happened. I’ll tell you where the same factors are creating rare opportunities right now.
I’ll give you the hard data, and you can make up your own mind.
Tariff Terror
Major tariff threats kicked into high gear during the 2024 campaign and accelerated after the election. By early 2025, new tariffs on key trading partners were in place or threatened at scale. The media narrative couldn’t have been clearer: this would be an economic disaster.
Yet the S&P 500 did not collapse. It faced volatility on announcement days – normal when policy changes are digested – but recovered and advanced overall. From late 2024 (when tariff fears first dominated headlines) through the end of 2025, the index posted strong double-digit gains for the third straight year, closing 2025 around 6,845. Year to date through early April 2026, it sits essentially flat on the year. That’s not exactly the apocalypse that was promised. Investors who sold the fear didn’t just lock in temporary losses. They missed the rebounds.
GDP growth (the most common measure of the economy) told the same story. Real GDP (which accounts for inflation) expanded through 2025. Estimates are 2.1% for the full year, better than most pre-tariff forecasts that called for declines, if not a deep slowdown. Into 2026, the baseline outlook remains positive at roughly 2.2% for the year. Supply chains adjusted. Companies adapted. Just like they always do. The feared collapse of global trade with the U.S. never happened.
But what about Inflation?
It ticked higher temporarily as some import costs passed through, but the spike was modest. Core inflation moderated through 2025 and sits at 2.6% according to the latest reading. That’s elevated relative to the Federal Reserve’s 2% target, but far from the runaway scenario the headlines predicted. Tariff effects showed up gradually in goods prices (especially certain categories from China), yet overall consumer prices did not spiral.
In short, the economy did not get “destroyed.” It absorbed the policy shift, adapted, and kept growing. The fearmongering created a classic investor trap – selling into temporary uncertainty instead of taking advantage of long-term buying opportunities.
This is the pattern we see over and over.
The media describes the worst-case scenario as all but guaranteed. This leads investors to overreact, creating buying opportunities for those who stay focused on fundamentals. That’s the Wide Moat philosophy in a nutshell. And it pays dividends.
Today’s Best Setups
Which brings us to two areas of the market right now where the exact same dynamic is playing out: Select asset managers and publicly traded business development companies (“BDCs”).
Ares Management (ARES) and Blackstone (BX) are two of the clearest bellwethers for the alternative-assets boom and recent “bust” if you listen to the pundits. Both have built massive private-credit and private-markets platforms that now dominate.
But in 2026, their stocks have taken a beating. Ares is down roughly 15% year to date. Blackstone has fallen around 12%. The group as a whole – Apollo, KKR, Blue Owl – has seen double-digit declines amid headlines about “private-credit stress.”
Yet once again, narrative and hard data don’t align…
There is redemption pressure on many private credit funds, that’s true. The consensus is that it’s fueled by retail investors panicking about AI disruption in software.
But look past the noise. Private-credit markets remain remarkably stable. Defaults and realized credit losses stayed low through 2025, well below historical averages and far below what a true crisis would produce. Assets at the leaders continue to compound.
Ares, for example, sits on enormous dry powder and continues to deploy capital into high-quality direct-lending opportunities. Blackstone’s diversified platform (credit plus real estate, infrastructure, and more) gives it multiple growth levers. Both generate truly massive profits for shareholders.
The roughly 40% sell-off in both stocks versus their 52-week highs has created a valuation disconnect. The tariff episode reminds us that when headlines scream at us to be afraid, that’s when we focus on underlying businesses. Investors who sold the tariff fear locked in losses and missed the lucrative recovery. I think that’s exactly what’s happening right now with several top asset managers and BDCs.
The Ultimate Income Machines
The story gets even sharper when you zoom in on publicly traded BDCs – the most accessible way for individual investors to own slices of the private-credit market.
Shares of many BDCs are down sharply – some 20%-plus over the past year. Many trade at meaningful discounts to net asset value (“NAV”), which is the fair value of the company. This normally only happens in full-blown economic crises like 2020. Headlines warn of redemption waves, AI-driven software defaults, and a potential “meltdown” in the $2 trillion-plus private-credit universe.
Again, the data tells a different story.
Realized credit losses for the BDC universe remained exceptionally low in 2025 – around 0.70% for the full year. This is below long-term averages. The core of most BDC portfolios continue to deliver attractive yields in the low-to-mid-teens. Software exposure is real, but easily manageable for better lenders.
Remember this: Fear is loud and data is quiet. So are many bulls. Think about it. If someone is bearish, they’ll spread panic to drive prices lower. It’s in their interest. Long-term investors stay quiet too because they want to buy as many shares as possible at the steepest discount. They know data that drives stocks long-term. They don’t need to yell about it. The fundamentals will do the talking.
Just as tariff headlines created short-term selling pressure that the broader economy shrugged off, the private-credit fear trade has pushed BDC prices and their managers well below fair value.
For income-focused investors, that means higher yields and greater upside potential. That doesn’t mean we ignore risks. We just don’t overreact to them.
Regards,
Stephen Hester
Chief Analyst, Wide Moat Research
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