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Despite a Strong Economy, Corporate Borrowers Are Feeling the Pressure

Recently, Apollo Global Management co-president Jim Zelter expressed concern about the pockets of stress within the otherwise robust US economy. Despite the strong economic indicators, some corporate borrowers are struggling with high debt burdens and slow recovery from the COVID-19 pandemic.

Zelter pointed out that while there have been signs of challenge and weakness, there has also been a significant amount of private equity and financing activity over the past five to seven years. This activity has led to borrowers facing “stray challenges around the edges,” he said. Despite the corporate default rate reaching 5% at the end of last year and equity market surges of over 20%, Zelter warned of a “hardening of economic conditions” taking hold.

In terms of the Federal Reserve’s rate-cutting trajectory, Zelter addressed the return of the “Fed put” and the central bank’s ability to combat volatility with existing tools. He noted that the Fed’s pushed back timelines for rate cuts, with many experts and analysts pinning their hopes on the first rate cut happening in May.

Strong economic indicators such as a 3.3% GDP surge in the fourth quarter of last year and a lower-than-expected unemployment rate of 3.7% have been recently released. However, these indicators have created a conundrum for investors as strong data pushes back expectations for rate cuts in

By Editor

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