What if a private-credit blowup freezes shadow-bank lending?
Mark-to-market in opaque private-credit books forces HY spreads wider; the cleanest trade is short HYG / long IG-HY decompression, with money-center banks (JPM) the equity expression as warehouse lines get marked. Rhymes with First Republic / Credit Suisse (2023): regional and credit-sensitive names gapped while the index held until forced selling hit. Forward angle: today's risk sits in non-bank BDCs and direct-lending funds with quarterly NAV marks, so the freeze shows up with a lag, not a Lehman-style overnight gap.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. A private-credit / shadow-bank blowup freezes lending and marks down assets. The trigger decomposes into signed root‑shocks — Credit spreads ▲ — which propagate through our causal graph to the markets below.