Two corners of the stock market that tend to sniff out trouble early are telling very different stories heading into 2026.
At a high level, regional banks and private credit lenders are in the same business. They lend to borrowers who are not exactly pristine. That makes their stock performance a useful stress test for the broader economy. This year, though, their paths have sharply diverged.
Banks cruising, private credit slipping
The SPDR S&P Regional Banking ETF $KRE ( ▼ 0.49% ) has been flying in 2025, while the VanEck BDC Income ETF $BIZD ( ▲ 0.83% ) has been sliding. Even after accounting for BIZD’s higher dividend yield, the performance gap is still close to 20 percentage points through December 24.
Part of that split makes sense. Regional banks benefited from the Fed’s easing cycle, which relieved pressure from high deposit costs and long-duration bond losses that triggered the 2023 mini banking crisis. Lower rates helped stabilize balance sheets and restore confidence.
Private credit, meanwhile, has had its own headaches. Blowups like subprime lender Tricolor and auto parts company First Brands reminded investors that lending outside the public markets carries real downside when conditions tighten.
The tailwinds may be fading
As macro analyst Jon Turek put it, private credit firms have spent the post-GFC era benefiting from either cheap capital or strong nominal growth. That safety net now looks less reliable. Capital is no longer cheap, and growth is uneven.
That raises an uncomfortable question. If this is still the golden age of private credit, why do publicly traded lenders look so beaten up. And if regional banks are pushing toward 52 week highs, how worried should investors really be about the US economy.
Why this matters going into 2026
If the US economy stays healthy, inflation remains sticky enough to keep policy closer to neutral, and employment avoids a sharp downturn, both of these lending-heavy ETFs should theoretically be doing fine.
Prolonged weakness in either one would be harder to dismiss. These vehicles sit close to the credit cycle and deal with borrowers that feel stress first. A sustained breakdown would likely signal rising economic risk rather than simple stock-specific noise.
For now, the divergence itself is the story. And it’s one worth keeping on the dashboard as markets look ahead to 2026.