About 11.5% of listed U.S. stocks already belong to a large network of “zombie” companies that have consistently earned less than they owe in interest costs, according to a tally from Glenmede.
Stocks, unlike bonds, often are at risk of seeing their entire value wiped out if a company files for bankruptcy. Recessions also tend to shake out smaller and weaker companies with high debt loads, in part because funding from Wall Street can dry up. The Russell 3000 index tracks shares of the largest 3,000 publicly traded companies, weighted by market capitalization, making it a proxy for the U.S. stock market, whereas the S&P 500 index SPX tracks the biggest 500 companies and the Dow Jones Industrial Average DJIA tracks 30 stocks.
Yet the biggest junk-bond ETF, the iShares iBoxx $ High Yield Corporate Bond ETF HYG, was off only 1.4% on the year through Tuesday, according to FactSet.