New fears are beginning to emerge about a potential ‘corporate debt bomb’ which could send the global economy into a tail spin if the Coronavirus continues to plague the stock market.
As Greenwich Time reports:
The coronavirus panic could threaten a $10 trillion mountain of corporate debt, unleashing a cycle of layoffs and business spending cuts that would hit the economy just as some analysts are warning of a recession.
Financial markets already are showing major signs of stress. Investors are demanding higher interest payments in return for lending to less creditworthy companies; some businesses are delaying their planned bond sales while they wait for Wall Street to settle down; and ratings agencies are moving toward downgrading some corporate borrowers.
The mammoth debt bulge includes a dramatic increase in borrowing by the lowest quality investment grade firms — those rated just one level above “junk.” More than $1 trillion in “leveraged loans,” a type of risky bank lending to debt-laden companies, is a second potential flash point.
Watchdogs including the Federal Reserve have warned for years that excessive borrowing by corporations, including some with subpar credit ratings, might eventually blow a hole in the U.S. economy. Now, as Wall Street wrestles with a global epidemic, the debt alarms show how investors are reassessing risks they overlooked during the long economic expansion.
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I am investing taking advantage of the low turn. Stocks & Bonds are not the only areas that are falling.
IMHO, the coronavirus scare is just that, a scare and will not last for a substantial period of time. Once the disease has run its course, infecting millions and killing thousands, it will wane and fade in the memories of most Americans, as seems to be the case with the Chinese.
Based upon the weakness of the currently presumed Dem nominee, Joe Biden, it seems likely that Trump will be reelected and the stock market scare will end with a swift expansion to the area of its previous highs. Remember, the economy was tooling along on an unprecedented path under Trump’s policies and there is no reason to believe that it should not recover, once the corona scare passes and Trump is reelected.
Only a silly can predict such things. Unless he or she want to invest in Cannabis.
The only economy that needs to crumble are the party of the democracts and their donors. They are responsible for this so it should be all of them to be hurt with with. This is nothing but a political stunt to get Trump out. It is wrong what they are doing, tells me that the democracts suck and know they can’t win so they are playing dirty politics