As the coronavirus crisis drives the world economy into recession or worse, too many corporations have too much debt and will not recover. How could debt destroy your investment portfolio?

1. How Could Debt Destroy
Your Investment Portfolio?
By www.ProfitableInvestingTips.com

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tips/how-could-debt-destroy-your-investment-portfolio
Despite Presidential assurances to the contrary, the
coronavirus is taking hold in the USA as well as
everywhere else in the world. The stock market
has tanked and one question is how far stocks
will fall. The other is if this will be so bad that it
leads to an economic collapse. A major factor
today that puts your investments at risk is the
high level of corporate debt. How could debt
destroy your investments?

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tips/how-could-debt-destroy-your-investment-portfolio
How Could Debt Destroy Your Investments?

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tips/how-could-debt-destroy-your-investment-portfolio
Despite the Fed buying treasuries and reducing
interest rates to nearly zero, the market is still
scared. The reason is the combination of a
slowdown caused by the virus and huge levels of
debt. In this regard, The New York Times writes
about how the coronavirus will destroy the
economy.

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tips/how-could-debt-destroy-your-investment-portfolio
Though the Federal Reserve moved over the weekend to
slash rates and buy treasuries, markets around the world
fell on Monday anyway. The coronavirus threatens to set
off financial contagion in a world economy with very
different vulnerabilities than on the eve of the global
financial crisis, 12 years ago.

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tips/how-could-debt-destroy-your-investment-portfolio
In key ways, the world is now as or more deeply in debt as
it was when the last big crisis hit. But the largest and
most risky pools of debt have shifted - from households
and banks in the United States, which were restrained by
regulators after the crisis, to corporations all over the
world.

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tips/how-could-debt-destroy-your-investment-portfolio
Profits, or at least cash flow, are what have been
keeping the market going up. The prospect of
national economies screeching to a halt has
investors worried about cash flow drying up.
But, for many companies, the risk is going out
of business. They point out that there are way
too many “zombie” companies that are already
having trouble coping with their payments.
Those in the travel, entertainment, or restaurant
sectors are facing a prolonged period of little or
no income.

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tips/how-could-debt-destroy-your-investment-portfolio
While the problem in 2008 came from household
debt and banks, the issue today is companies
across the globe that have taken on huge
amounts of debt and will not be able to make
payments. As many as sixteen percent of US
companies fit this description as do ten percent
of companies in Europe and China.

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tips/how-could-debt-destroy-your-investment-portfolio
Companies that went private in order to reduce
their exposure to post-2008 regulations are at
special risk as many took on lots of debt to buy
out shareholders.

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tips/how-could-debt-destroy-your-investment-portfolio
How about Stocks like Tesla and
Amazon.com?

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tips/how-could-debt-destroy-your-investment-portfolio
While we would not be surprised to see companies
in the oil and natural gas sector go belly up due
to the virus and oil price war, how about market
leaders and stars like Amazon.com and Tesla?
While Amazon.com may sell more things online
during coronavirus dictated lockdowns Tesla
does not have this option.

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tips/how-could-debt-destroy-your-investment-portfolio
If there end up being massive government
bailouts, who will get the money? If credit is
shorn up, who gets help paying their debts? For
that matter, if they go to negative interest rates,
how will that play out with your portfolio?

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tips/how-could-debt-destroy-your-investment-portfolio
Investors will be wise to look at the debt levels of
the companies in their portfolios and cull out
stocks in sectors likely to be weak in the near
term and whose debt burdens are excessive.

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tips/how-could-debt-destroy-your-investment-portfolio
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