U.S. corporations are sitting on record amounts of cash to reduce shock caused by the coronavirus pandemic, S&P Global Ratings said on Dec. 8.
Cash and investments owned by non-financial and non-utilities corporate issuers jumped 30 percent to an all-time high of $2.5 trillion in the first half of 2020, the ratings agency said a statement.
Those companies have increased their debt levels by 9 percent to nearly $8 trillion, S&P Global Ratings said, adding that the U.S. Federal Reserve’s plan to maintain interest rates near zero for at least another three years will help companies that may need to take on more debt if the health crisis worsens.
“S&P Global Ratings believes near-term economic uncertainty likely will keep balance sheets relatively conservative,” the ratings agency said. “However, if the outlook brightens in 2021 as coronavirus vaccines become widely available, we believe some issuers will revert to more aggressive financial policies.”
Optimism about the distribution of vaccines on Dec. 8 pushed the S&P 500 and Nasdaq to record highs.
Despite the pandemic and its crippling effect on the global economy, the S&P 500 benchmark has climbed 15 percent in 2020 as investors bet on an eventual recovery and a surge in corporate profits.
By Noel Randewich