“The chart of corporate debt-to-GDP this cycle looks a lot like the mortgage debt-to-GDP ratio of a decade ago. The ratio now has risen to a record high of nearly 50%, and peaks in this metric, like so many other measures listed above, lead peaks in the economic cycles. Look at how close the ‘recession bands’ are to the peaks in the corporate debt ratio.

While many focus on the high yield market, it actually is now exceeded in size by the leveraged loan market, which is in a bubble of its own. And it is the junky nature of today’s investment grade market that really has me unnerved. This is now a $6 trillion market, but half of it is rated BBB or worse — the lowest quality segment before hitting junk. The BBB space has expanded from $600 billion a decade ago to over $3 trillion now. The median debt-to-EBITDA ratio has jumped from 1.9x a decade ago to 3.2x presently, so debt ratios have soared no matter the measure.”

- David A. Rosenberg in “Breakfast With Dave”, January 28th, 2019

A time machine would make our work a lot easier, but by analyzing historical data and layering on expectations for future economic we can develop a best guess for what might happen next.