Gundlach Expects Trouble for U.S. Equities

In an interview with Finanz und Wirtschaft, DoubleLine CEO Jeffrey Gundlach expressed concern for U.S. equities as a result of the levels of government and corporate debt, arguing that investors must “brace for significant disruptions.’ Here are highlights from Gundlach’s comments: Investors should begin preparing for the next downturn now, even though we can’t know when it will come: “If you don’t start preparing now, you will maybe do better while the economy continues to… Read More

A $3 Trillion Tsunami Looms

An article in MarketWatch warns that the mountain of corporate debt coming due by 2023—$3.3 trillion, representing 48% of all current outstanding commercial debt—could spell bumpy road ahead for the stock market. The article cites comments from industry veteran and Heartland Advisors chief executive Will Nasgovitz: “with interest rates low, the economy strong, and relatively easy lending standards, the thinking went that borrowing to buyback shares or finance acquisitions was a low-risk strategy. But the… Read More

Corporate Debt and the Next Recession

A recent Bloomberg article features a debate between columnists Nir Kaissar and Noah Smith on whether U.S. companies have accumulated too much debt and whether it represents a risk to the economy. Here are some highlights: According to Smith, Bloomberg News data showed that “a lot of companies are so leveraged that they would have a junk label if credit raters weren’t being lenient.” “I don’t see much in companies’ financial statements to be alarmed… Read More

U.S. Recession in the Offing?

A recent Bloomberg article reports that an economic contraction could be coming as soon as next year, citing the Fed, the flattening yield curve, corporate leverage and tariffs as contributing factors. “Other than in the most abstract way, there aren’t a lot of people talking about a coming U.S. recession,” the article states. But the fact that policy makers are raising rates and are reducing the central bank’s balance sheets reflects a more aggressive stance.… Read More

S&P Says High Corporate Debt Could Trigger Defaults

According to S&P Global Ratings, tightening credit conditions could lead to increased defaults by companies with heavy debt loads. This according to a recent article in Bloomberg. The article cites a February 5th report issued by the rating agency that says removing the “easy money punch bowl” could trigger a rash of defaults since heavily leveraged borrowers are more sensitive to rate hikes. It cites a global sample of 13,000 business entities showing that 37… Read More

Buyer Beware of Companies Carrying Heavy Debt Loads

A decade of historically low interest rates has encouraged businesses to increase leverage and this could prove dicey for investors, says a recent Barron’s article. According to Morningstar fund analyst Kevin McDevitt, companies have been refinancing or borrowing for share buybacks, not necessarily to invest in existing businesses. “The leverage,” he says, “is an added risk not only to the individual companies, but also to the funds that own them.” Morningstar research found that, in… Read More