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Let's talk about credit markets now. We currently have more than $7 trillion of sovereign debt at negative yields. That induces the stretch for yield . We now have firms that are in an unsustainable situation as their dividend yields are higher than their coupon yield.
This is creating systemic risk, because leverage is increasing not only with sovereign debt but in the corporate sector as well. But, in the same time, there is not positive revenue growth except for developed Asia. The fundamentals don’t look good for companies because consumption isn’t as strong as it should be. That build-up in leverage has been accompanied by a decline in credit quality. What will happen when long term rates will go up and corporates will have to roll-over their bonds at higher costs?