Markets

Are we better prepared for another crisis?

Amauri AM / Unsplash
Amauri AM / Unsplash

The global economy appears to be humming along 10 years after the collapse of Lehman Brothers, a defining moment in the global financial crisis. Many problems exposed then have been addressed, giving us confidence that the odds of a repeat of a similar crisis may be low. Yet new risks and some old ones deserve investors' attention.

We illustrate the dynamic by showing leverage in different parts of the U.S. economy in the chart above. Debt levels in the household and financial sectors have both declined from pre-crisis peaks. Recall that high leverage in those two sectors was at the center of the global crisis. The leverage in the financial sector, represented by the asset-to-equity ratio among security brokers and dealers, has also decreased. New risks? Sovereign and non-financial corporate debt is on the rise. Government debt has jumped to nearly 94% of U.S. GDP from 52% in 2007-and is headed higher. Leverage among non-financial corporates has exceeded the pre-crisis level after a period of decline. What's more worrisome is that it is a global phenomenon. The silver lining: Lower interest rates make the cost of servicing this debt much cheaper than a decade ago, and maturities have been lengthened, providing resilience to rising rates. [storytout]Read more in our Weekly commentary . [/storytout]

Proceeding with caution

higher precautionary savings

Bottom line

Richard Turnill is BlackRock's global chief investment strategist. He is a regular contributor to The Blog

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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