The Fed's pandemic response, as well as the economic impact of COVID-19, have created a surge in "zombie" companies with limited future viability, according to Todd Jablonski, a CIO at Principal Global Investors.
He added: "Perversely, United States Federal Reserve actions to support overall economic activity during the pandemic via low rates and credit purchases have had the negative side effect of providing life support for zombies." The percentage of equities in each of these categories rose in the first half of 2020, most strongly year-over-year and based on three-year sales growth, where Principal now considers 69% and 51% of firms zombies.
Nevertheless, no matter the short-term life-giving forces, zombie companies eventually will die, he said. 4 portfolio moves for navigating the zombie apocalypse, since about three-quarters of the US investment grade bond market is "out of zombie risk." However, he warned that investors should be ready for the moment the Fed backs out of its support of markets, which could be brought on by fiscal stimulus, a vaccine, or trade regulation.
How about minimizing risks for wokers ?
This is what happens when your central bank and government are absolutely dedicated to not letting businesses fail. It only makes the situation worse and it harms everyone except for the ones that don't need any help.
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