Why U.S. Corporate Bankruptcies Could Skyrocket
"U.S. bankruptcies in the first quarter of 2021 and all of 2020 were above the 13-year average"
by Bob Stokes
Updated: July 02, 2021
An April 17 article headline on the website of National Public Radio says:
U.S Economy Looking Good As Spending Jumps In March
And, on April 29, The New York Times said:
Americans' spending on durable goods -- cars and furniture and other goods meant to last a long time -- rose at a stunning 41.4 percent annual rate in the first three months of the year.
Considering that the economy is "looking good," economic observers might conclude that a wave of corporate bankruptcies is of little concern.
However, that conclusion would be off the mark.
Our June Global Market Perspective provides insight with this chart and commentary:
U.S. bankruptcies in the first quarter of 2021 and all of 2020 were above the 13-year average. In March, there were 61 announced corporate bankruptcies, the highest total since July 2020. If companies are defaulting in record numbers in China and at above average levels in the U.S. with interest rates at historic low levels, what will happen when rates rise appreciably?
That's right, defaults would zoom higher.
Understand that in the U.S., "the level of outstanding corporate bonds is the highest in history at approximately $10.6 trillion." This represents almost half of annual U.S. GDP.
A positive social mood has led executives at many U.S. firms to believe that they can issue and service ever-increasing levels of debt.
But interest rates may rise a lot higher than many businesspeople expect. Hence, many corporate bonds would lose value.
Indeed, our June Global Market Perspective provides Elliott wave analysis of the iShares Core U.S. Aggregate Bond ETF, the largest exchange-traded bond fund in terms of assets.
Get the interest rates insights that you need by following the link below.
U.S., Asian-Pacific and European Financial Forecasts -- Together in ONE Publication
It's called the Global Market Perspective: the financial analysis it offers subscribers is wide and deep.
Specifically, that means detailed coverage of 50+ worldwide markets. Indeed, each month, it usually takes 50+ pages to present the charts and forecasts.
So, you can imagine the extensive research and technical analysis that goes into each issue of our Global Market Perspective, including the new July issue (due out July 2).
Follow the link below so you can gain instant access to our Global Market Perspective, which brings you coverage of global stock markets, bonds, forex, cryptocurrencies, metals, energy and much more.
Global Market Perspective
Gives you clear and actionable analysis and forecasts for the world’s major financial markets.
Get stock indexes, precious metals. forex pairs, interest rates, energy markets, cryptos, cultural trends and more.
In the past week coffee saw its fastest surge since 2014. As for "why," commentary world-wide pointed to a freak frost in the heart of Brazil's coffee belt. Now see the chart and forecast that was way ahead of the trend.
Oil prices took a deep dive into the mid-$65 range this week. See why, from the Elliott wave perspective, the sell-off made complete sense -- plus, get a good idea as to what's next, courtesy of our Energy Pro Service analyst.
Many investors believe that global stock markets will benefit from the current economic "boom." That seems to make sense -- however, you may want to review what financial history shows.