Dangerous Debt?
Even before the coronavirus pandemic, global debt stood at record levels. Now with fiscal stimulus pouring in around the world, debt is surging. What are the implications?​
Debt Continues to Trend Higher​​​​​​

  • Worldwide debt reached $191 trillion at the end of 2019, according to the Bank for International Settlements. That represents 6% year-over-year growth and pushed global debt-to-GDP to 243% from 233% as compared to the prior year. U.S. debt hit approximately $55 trillion or 254% of GDP, including the government, corporate and household sectors.

  • These debt levels are increasing rapidly given the global fiscal response to coronavirus, which Cornerstone Macro estimates at over $11 trillion. For the U.S., this debt issuance along with large deficits may cause government debt to expand quickly, with Goldman Sachs estimating that U.S. federal debt held by the public relative to GDP will hit 150% by 2030, up from 79% in 2019.

  • While the absolute levels of debt paint a bleak picture, debt service (the amount of interest and principal amortization) relative to income looks more manageable. For example, according to the Bank for International Settlements, U.S. household and corporate debt service relative to income is below the 20-year average; the same is true in Italy, the U.K., Spain and Japan. Overall, debt expansion is likely to slow as stimulus dries up, weighing on economic growth rates. This will potentially put a premium on companies that can outgrow the industries in which they compete in a lower growth environment.


​​

The views expressed are the views of Fred Alger Management, LLC as of June 2020. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by Fred Alger Management, LLC. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares.

Risk Disclosure: ​Investing in the stock market involves certain risks, including the potential loss of principal. Growth stocks tend to be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. ​​


Fred Alger & Company, LLC 360 Park Avenue South, New York, NY 10010 

www.alger.com / 800.305.8547 (Retail) / 212.806.8869 (Institutional) ​