Macro Risks and Active Accelerants — Paper 2: Current Accelerants

Paper 1 argued that debt creates the conditions for a crisis but rarely chooses the moment. That is the job of an accelerant: an event or policy that sharply speeds up the debt cycle.

Some come from outside the system, such as a war or an energy shock. Others are generated by the debt cycle itself, when cheap credit is channelled into investment that runs ahead of the returns it can earn.

This paper analyses the three accelerants in play today.

Iran and energy, an external shock. Around 20% of the world’s oil passes through the Strait of Hormuz. A disruption would cut growth and raise inflation at the same time, just when governments and central banks have far less room to respond than in 2020 or 2022. The paper explains why the Iran risk works like a ratchet: much of the damage does not reverse when tensions ease.

AI malinvestment, an internal accelerant. The AI build-out is moving from cash flow to debt funding, at structurally higher interest rates, in an equity market heavily concentrated in a handful of names. The paper sets out why a disappointment would be a credit event as well as a valuation correction, and why it echoes Japanese property in the late 1980s and real estate before the global financial crisis.

Private credit, the hidden leverage. Private credit is where much of the private sector’s borrowing moved after the global financial crisis. The loans were priced for near-zero rates, are valued by models rather than markets, and are held by insurers and pension funds with long-dated liabilities. Listed vehicles are already flashing a warning, and the Bank of England has repeatedly warned that banks cannot fully measure their own exposure.

For each accelerant, the paper sets out how the shock would spread, its impact on the three structural risks, a range of scenarios and the signals to watch. It also covers how the three could compound one another.

This is the second of a three-part series. Paper 1 sets out the framework. Paper 3 is a monthly review for clients only, showing where each market stands within the framework and the investment themes that follow.

To request a copy of Paper 2, please get in touch.