The Credit Cycle Is Flashing Yellow

The credit markets are flashing yellow, with rising default rates and deteriorating fundamentals across private credit and commercial real estate. Oracle faces heightened credit risk as its debt load surges from AI infrastructure CapEx and skepticism grows over its $300B OpenAI deal. CMBS delinquency rates, especially in office and multifamily, have reached or exceeded Great Financial Crisis levels, pressuring regional banks and insurers. The article below highlights several parts of the credit markets that are clearly signaling caution is increasingly merited.

Following COVID, the Federal Reserve boosted the money supply by roughly 40% over two years and kept the Fed Funds rate near zero. The central bank’s goal was to support the economy during the era of lockdowns, masks, and mass vaccination. However, the Fed’s largess had its consequences.