New York (CNN Business)It’s getting awfully difficult for investors to ignore Corporate America’s mountain of debt.
Fears of an economic slowdown — or even recession — have turned a spotlight on the debt that businesses piled up during the past decade, when borrowing costs were historically low.
For the first time since the Great Recession, investors want companies to prioritize paying down debt rather than investing in the future or share buybacks and dividends, according to a Bank of America Merrill Lynch survey of global fund managers.
Forty-six percent of fund managers surveyed think corporate balance sheets are overleveraged, Bank of America said. That’s a record high for the survey.
“2019 will be defined as a year of deleveraging,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “You’re going to hear much less about buybacks and dividend increases. That’s one of the areas of excess in this cycle.”
US nonfinancial companies rated by Moody’s were sitting on $5.7 trillion of debt as of the end of June.
“Atlantic Equities’ John Heagerty cut his recommendation on JPMorgan Chase & Co. to neutral, saying the bank now ‘offers the least upside’ to price targets.”
“Our lower price target reflects recent volatility, rather than a change in fundamental backdrop” is a bunch of big bank nonsense-speak for “We were flat out, painfully, 100%-in-the-wrong-direction-wrong but aren’t honest enough to just admit that.”