More 'Naked Swimmers' Will Continue To Emerge As The Tide Recedes

Markets continue to trade near record highs even as bond yields have hit their highest levels since 2007 and energy prices remain elevated. Private credit markets are deteriorating, with record default rates and redemption gates at major funds like Apollo (APO) and Blackstone (BX), raising systemic risk. The AI infrastructure buildout has driven hyperscalers to $3 trillion in off-balance sheet liabilities, with credit markets showing stress — Oracle's (ORCL) debt was downgraded and CDS prices are spiking. Why prudent investors should remain cautious around portfolio allocation and two areas to watch for more 'naked swimmers' to emerge are highlighted below.

Prior to stepping down last year after six decades at the helm of Berkshire Hathaway (BRK.B) Warren Buffett built up a massive and record cash pile at the firm, betting on lower entry points in equities.