Clients and regular video blog viewers have heard me say that, in a macro sense, our job here at PWA is to first assess probabilities in terms of the direction of the next ‘big’ move in financial markets and the economy, and, second, to maintain a firm handle on what lies beneath the surface in order to anticipate the depth and the length of that next big move.
As we’ve discussed, we are very concerned with what lies beneath — in corporate debt in particular — when the next recession comes.
Per the following, so is the International Monetary Fund:
The IMF’s Global Financial Stability Report has serious warnings about significant financial stability vulnerabilities in the U.S. and the rest of the world. IMF researchers’ analysis shows that if a major economic downturn occurs, “corporate debt at risk of default would rise to $19 trillion, or nearly 40 percent of the total debt in eight major economies.” The IMF report bluntly pointed out that “Surges in financial risk-taking usually precede economic downturns.” Forbes
Yesterday’s quote of the day speaks to that last sentence…