The largest variable that has changed since my last letter is the Iran conflict and what it means for energy prices. The popular narrative that war in the Middle East necessarily produces a U.S. consumer crisis does not survive contact with the data. WTI crude sits near $95 per barrel and Brent near $101. Both spiked above $110 briefly during the conflict but have not held there. In real terms, today’s oil is materially cheaper than at the 2008 peak (about $215 in 2026 dollars).

The U.S. is a net energy exporter. Rising prices benefit Texas, Louisiana, and the broader Gulf producer base alongside the pressure on consumers. The standard oil-to-GDP relationship for the U.S. as a net energy exporter is approximately 0.2%–0.3% of annualized GDP for every sustained $10 per barrel increase in oil prices—modestly smaller than the importer-economy estimates often cited in broader coverage. My current expectation is that this remains a contained event. But “I expect” is not “I know.”

The most underappreciated macro signal is the disconnect between Fed policy and the long end of the Treasury curve. The Fed has cut across recent meetings, yet the 30-year sits at 4.95%, higher than where it was when the cuts began, and briefly above 5.0% in early May. The 10-year is 4.29%. The bond market is telling you something about long-term inflation, fiscal sustainability, and the credibility of monetary policy. For the consumer, mortgages, auto loans, and credit cards remain expensive regardless of what happens at the front of the curve. A representative anecdote from the household level: I recently reviewed the auto financing on a new vehicle purchased by a recent college graduate earning a five-figure salary. The rate was 29% APR. After a year of $700 monthly payments she will still owe more than the car is worth on resale. Subprime auto delinquencies are now at the highest level in 32 years, even as headline GDP prints north of 2%.

The clearest recession-trajectory signal is the inversion between job openings (4.2 percent as of April 2026) and unemployment (4.3 percent). For the first time in this cycle, jobseekers outnumber positions. The clearest illustration is the divergence between corporate profitability and corporate hiring. The largest U.S. banks and big-tech firms cut a combined 30,400 net jobs in Q1 2026 alongside record GAAP earnings. Amazon shed 16,000 positions while reporting $21.2 billion Q1 operating net income (the figure shown in the deck above; headline GAAP including a one-time $16.8 billion pre-tax gain on the Anthropic investment was $30.3 billion). JPMorgan posted $16.5 billion. Bank of America $8.6 billion. Citigroup $5.8 billion. Goldman Sachs $5.6 billion. Morgan Stanley $5.6 billion. Wells Fargo $5.3 billion.

Oracle has now announced approximately 30,000 layoffs globally, including roughly 12,000 in India. Block (formerly Square) cut more than 40% of its workforce in February and explicitly cited automation and AI. Coinbase followed in early May with a 14% reduction. Wage growth for job switchers has reaccelerated to 5.0%, though the benefit is only meaningful if they are able to secure their next role. Overall wage growth sits at 3.9%, stayer growth at 3.8%. Salesforce has lost approximately $95 billion in market capitalization over the five months ending May 2026. ServiceNow has lost roughly $65 billion over the same window. The combined hyperscaler CapEx running through Amazon, Google, Meta, and Microsoft in 2026, between $610 and $640 billion, is simultaneously dissolving the moats of multi-billion-dollar incumbents. The applicant calculation has flipped from “where is my next promotion” to “what is my downside path.” That is the demand environment we underwrite into.

Our platform now holds financial information on more than 60 million Americans across our partner-lender network, and we processed over 20 million unique loan applications in Q1 2026 alone. Q1 is seasonally our slowest quarter. Tax refunds reduce demand for short-term liquidity. That we processed 20 million applications in the slowest quarter of the year tells you where consumer demand for installment credit is trending. The same banking and lending integration that verifies funds before approval and confirms balances before payment also gives us live visibility into the underlying consumer at scale.

The composition of this demand is what matters. Higher-quality consumers who would not have considered installment lending two years ago are now applying as savings cushions deplete and traditional credit channels tighten. Lower-quality consumers remain in the pool because their financial position continues to erode. This bimodal expansion is exactly what we observed at the onset of COVID-19, and it is a reliable leading indicator of credit cycle change. From an underwriting standpoint, it is also genuinely good for us. It gives us more high-quality customers to select from, which is one reason our unit margins have continued to hold into stress rather than deteriorate.

The most-cited reason for loan applications this quarter was food and living expenses, followed by emergency and unexpected costs. Median bank balance among our applicants is $185, up modestly from $175 last quarter, but still at a level where a single car repair, a medical co-pay, or an unexpected utility bill produces an immediate financial crisis. Consumer expenses across the applicant pool increased 7% quarter-over-quarter. The U.S. personal savings rate sits at 3.6%. Consumer sentiment registered a preliminary 48.2, a record low. These are the numbers of a population managing, not thriving.

One important counterweight: U.S. household debt to GDP sits at 68.8%, well below the levels that preceded the 2008 financial crisis. Consumer spending continues at a record $16.67 trillion annual run rate. Despite genuine pressure on the lower 90% of the income distribution, the household sector is structurally less levered than it was going into the last major credit event. Whatever plays out in this cycle, it will not be a 2008 redux. It will look different.

The private credit story I described last quarter has accelerated and accelerated visibly. Cumulative redemption requests across major non-traded BDCs and private credit platforms now total approximately $19 billion in Q1 2026, with just over half of those requests honored. The bifurcation in coverage is the story. Blackstone, with a uniquely large balance sheet, has paid out roughly $3.7 billion in requests on the largest non-traded BDC in the market and chose not to invoke its 5% quarterly cap. Cliffwater received approximately $4.7 billion in requests against its core lending fund and honored about $2.4 billion. Apollo and Ares both received double-digit-percentage redemption requests against their respective non-traded BDCs and capped redemptions at 5%. Apollo honored roughly $0.7 billion against $1.5 to $1.6 billion requested. Ares honored roughly $0.5 billion against $1.1 to $1.2 billion requested. Blue Owl Capital’s February 18 sale of $1.4 billion in BDC assets at 99.7 cents on the dollar, explicitly to fund redemptions, was the visible edge. The rest is happening less publicly.

I will repeat what I wrote last quarter, because it has now been validated by hard market data: the underlying credit assets across the private credit industry are not, in aggregate, bad. The problem is duration. Platforms offering daily, weekly, or monthly liquidity to retail investors against five- to ten-year illiquid loans have a structural mismatch that becomes a crisis the moment capital flow turns. We are watching that crisis unfold in real time.

Hive’s structure was designed to make this category of failure highly improbable. Investor capital is committed for three years. Underlying loan assets mature in twelve months or less, and our new three-, six-, and nine-month products shorten that average further. When markets are stable and capital is cheap, that structure looks conservative. When private credit markets are repricing in real time, it looks intentional. We did not need to prepare for this moment. The structure has been in place from the beginning.

That is the architectural difference. I will also tell you what we have been deliberate about avoiding, because the negative space matters. As a matter of policy and structure, we do not cross-collateralize our paper, we do not securitize the portfolio for short-dated liquidity, and we do not give any single capital partner the right to pull credit lines on short notice. I am aware of a Florida-based lender that built a half-billion-dollar book over a decade and lost the company in a single week last year because a major investment bank in their capital stack, with cross-collateralized covenants across multiple lines, withdrew simultaneously. That is the lesson on the negative space. We have learned from those mistakes by structuring to avoid being in the same position.

Our lender partners’ Q1 FY2026 net unit margin is 27.0%, sustained at the prior quarter’s level. To restate the definition: that is the post-default, post-cost margin on every dollar deployed, after marketing, data, technology, operations, payment processing, collections, and call-center costs. Across consecutive quarters, that figure has progressed from 22.0 to 23.1 to 23.0 to 25.0 to 27.0 to 27.0%. Improvement has not reversed; it has plateaued at a healthy level. That is what should happen when underwriting tightens into a stress environment.

YTD return through Q1 FY2026 is 3.41%, bringing cumulative cash-on-cash return from inception to 124.80% (manager-reported, gross of investor-level fees; methodology disclosed in our Q1 FY2026 Performance Report). Over the same window from inception (July 2017 through May 2026), the ICE BofA High Yield Index has returned 57.5%, and the S&P 500 has returned 112.6% on a cumulative basis. We are not a hedge fund and the comparison to public market indices is imperfect by design. The data is the data.

Q1 2026 YTD performance versus the names many of you also hold (per manager investor-letter disclosures): ADR Managed Futures: 10.30%, Bridgewater: 9.10%, HFA: 3.40%, Citadel Wellington: 2.90%, Millennium: 1.90%, Balyasny: -3.80%, Exodus Point: -4.50%. We are above three of the largest multi-strategy platforms in the world and behind only the trend-followers and Bridgewater on a YTD basis. Our return is being produced from a portfolio of duration-matched, contractually defined cash flows, not from leverage on directional positioning. That is a meaningfully different risk profile than the funds we are listed alongside.

Cumulative since 2021 (per fund factsheet methodology): HFA: 76.25%, Apollo Diversified Credit Fund: 70.46%, Blackstone Private Credit (BCRED): 49.60%, BlackRock Private Credit (BDEBT): 35.14%. The compounding effect of duration matching, conservative underwriting, and consistent deployment is visible in every comparison frame we run.

In Q1 we deployed $12 million against an internal FY2026 deployment forecast that runs ahead of our $50 million 2026 capital-raise target, with $15 million committed for the balance of the year. AUM stands at $161 million. The constraint on the business continues to be capital, not opportunity. The demand-side ratio of qualified application volume to deployable capital is materially above 10 to 1 across our partner network.

I want to address something I get asked frequently: with margins this strong, why aren’t they going higher? It is the right instinct and the wrong conclusion. Our 27.0% unit margin is in part a sign of capital scarcity. With more capital, we could lower margins toward about 18% by serving more of the qualified demand we already see, generate substantially more total dollar profit, and deliver better products to better customers. Higher margins are not, as a rule, safer. They reflect what is being left on the table. A well-run lender at 20 times current scale at 18% net unit margin generates significantly more compounded cash than the same business at 10 times current scale at 27%. The larger version is also less sensitive to any single vintage. Scale is a risk-management tool, not just a profitability tool.

Our three-, six-, nine- and twelve-month term products are now scaling across our lenders. The strategic value is not just velocity, though shorter duration does compound capital faster. The key benefit is customer selection. Shorter terms expand the addressable market to higher-quality customers who would not accept longer-term debt, and they reduce risk per dollar deployed because the imputation horizon for default is compressed. The Multi-Arm Bandit / Thompson Sampling framework that governs our underwriting allocation handles this dimensional expansion natively. The first nine to twelve months of seasoned data on the new products will tell us how aggressively to expand the mix.