Nir Kaissar, Columnist

The Great Corporate Debt Scare

Investors are focusing on the wrong thing.

February 8, 2016 at 4:18 PM UTC

Nir Kaissar is a Bloomberg Opinion columnist covering markets. He is the founder of Unison Advisors, an asset management firm.

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A lot of people are worried about corporate leverage. Years of cheap credit have encouraged corporate borrowing, and credit spreads have widened recently on fears of a global slowdown -- all of which makes for a potentially explosive cocktail. By one measure -- the debt-to-earnings ratio -- corporate leverage is at a 12-year high.

But other measures of corporate leverage suggest that fears of a corporate debt binge are overdone. According to Bloomberg data, the debt-to-Ebitda, debt-to-equity, and debt-to-assets ratios for the S&P 500 Index are all well below their historical averages since 1990. The U.S. is not alone. All three ratios for the MSCI ACWI ex-USA Index are also well below their historical averages since 1995 (for both the S&P 500 and ACWI ex-USA, the first year for which data is available).