2018-09-23 08:37:00 Sun ET
Bank of America Merrill Lynch's chief investment strategist Michael Hartnett points out that U.S. corporate debt (not household credit supply or bank capital shortage) can cause the next financial crisis.
U.S. public corporations have gradually accumulated more than $6 trillion debt with low interest rates since the global financial crisis from 2008 to 2009. This corporate debt binge helps fund the recent recovery in new capital investment and equipment, full employment, and stock buyback in America.
Corporate default rates are minuscule, and U.S. companies now sit on hefty cash stockpiles primarily due to robust U.S. economic output gains and corporate tax cuts under the Trump administration. At some inflection point, however, economic growth and corporate income may start to slow down. U.S. companies then would have less firepower to pay back debt, and it is not easy for these companies to roll over their debt in due course. Debt-laden companies would be vulnerable to higher costs of capital as the Federal Reserve continues the current interest rate hike.
These high costs of capital can translate into a new corporate credit crunch, which adversely affects both employment and capital investment as the U.S. economy slides into an economic recession.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2019-11-09 16:38:00 Saturday ET
Federal Reserve Chairman Jerome Powell indicates that the central bank would resume Treasury purchases to avoid turmoil in money markets. Powell indicates t
2018-01-29 07:38:00 Monday ET
President Donald Trump delivers his first state-of-the-union address. Several key highlights touch on economic issues from fiscal stimulus and trade protect
2018-04-23 07:43:00 Monday ET
Harvard professor and former IMF chief economist Kenneth Rogoff advocates that artificial intelligence helps augment human productivity growth in the next d
2017-11-27 07:39:00 Monday ET
Is it anti-competitive and illegal for passive indexers and mutual funds to place large stock bets in specific industries with high market concentration? Ha
2018-03-19 10:37:00 Monday ET
Uber's autonomous car causes the first known pedestrian fatality from a driverless vehicle and thus sets off the alarm bell for artificial intelligence.
2019-01-17 10:41:00 Thursday ET
Sino-American trade talks make positive progress over 3 consecutive days as S&P 500 and global stock market indices post 3-day win streaks. Asian and Eu