A fund manager warns that a $ 3 trillion tsunami is about to overwhelm the stock market



Will Nasgovitz, who manages about $ 1.3 billion of assets as CEO of Heartland Advisors, is not calling for a "total financial crisis" but with billions of billions of corporate debt due to expire in the next few years, the veteran of the sector does not plan to exactly navigate smoothly on the stock market, either.

"With low interest rates, a strong economy and relatively easy credit standards, it was clear that borrowing to buy back stocks or finance acquisitions was a low-risk strategy," Nasgovitz said in a recent article. . "But the next five years could seriously challenge this vision of Pollyanna."

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Nasgovitz used this chart to illustrate his position:




As you can see, about $ 3.3 trillion – or 48% of all outstanding commercial debt – matures by 2023. The timing could be problematic.

"The market would have a hard time digesting the market in the best of scenarios, let alone this late economic expansion," wrote Nasgovitz. "The warning signs of a tightening of lending standards for commercial and industrial borrowers add to our cautiousness."

He says that as banks become stricter, borrowers may end up paying higher rates simply to raise funds to end their obligations.

"We do not currently see signs of a total financial crisis on the horizon," he concluded, "we are convinced that excessive indebtedness adds unnecessary challenges to businesses in general. and will probably be an obstacle for large borrowers in intermediate countries. coming term. "

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Little fear on the market Wednesday with the Dow

DJIA, + 0.30%

and the S & P 500

SPX, + 0.24%

both moving slightly higher.


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