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Stock Market Rings Alarm Bells on Rising Corporate Leverage

  • Companies with weaker balance sheets underperforming all year
  • Uptick in investor aversion to corporate debt a global theme
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Sundstrom, Gilbert on a 'Healthy Correction' in Markets

Cracks in high-yield credit may have only started to emerge, but equity investors have been signaling growing preference for stronger balance sheets throughout the year, amid tightening monetary policies and booming debt issuance.

Global stocks with the lowest debt-to-equity ratios, a measure of balance-sheet strength, are outperforming those with the highest ratios, according to Bloomberg calculations. The data exclude financials, where gearing ratios tend to be higher than in other industries.