Keeping an Eye on Heavy Corporate Debt

Posted on 3-07-2019

This week, Craig Siminksi, of the Equity Design Group, shares with us a “big picture concern” for investors.

The opportunity to borrow at low interest rates has enticed corporations to issue more than $1.0 trillion in bonds every year since 2010. By the end of 2018, corporate balance sheets were carrying $9.1 trillion in debt, up from $5.5 trillion in 2008.

As a result, corporate leverage amounts to about 46% of U.S. gross domestic product (GDP), matching levels reached during the last financial crisis.

Corporations sell bonds to finance operations and capital investment. In recent years, more companies have used debt to fund costly acquisitions that may or may not improve future profit margins or growth prospects.

Now that interest rates are on the upswing, one big-picture concern for investors is whether heavy corporate debt will become a threat to the U.S. economy.

If you rely on corporate bonds for retirement income or to help temper the effects of stock market volatility, you might also consider the potential impact on…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 20 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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