Part 7/12:
Corporate America significantly increased leverage during the pandemic-era low-interest environment, taking on debt to fund stock buybacks, dividends, or other shareholder benefits. As interest rates rise:
Debt servicing costs for companies will increase unless they can secure fixed-rate loans.
Many firms are facing a season of debt refinancing at higher rates, which could squeeze profits or force cost-cutting measures.
Demand compression across sectors could trigger layoffs, slower hiring, or even recessions.
Particularly troubling is that some companies used borrowings for non-income-producing activities, like stock buybacks, which can temporarily inflate stock prices but do little to strengthen long-term earnings.