global debt: challenges and opportunities · global debt was on a steep rise before the crisis, and...

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CHIEF INVESTMENT OFFICE APRIL 2016

Global Debt: Challenges and Opportunities

The world is deep in a flood tide of debt. Do we care, and what can we do about it?

Debt is inextricably linked to economic growth. Whether in the form of government, business or household credit, debt can fuel economic growth, and economic growth can increase the propensity to borrow. And when growth is too weak, credit can be used to stimulate it. The cumulative effect of credit use by the various sectors of an economy is a rise in its overall debt. While economic prosperity is often credit-financed, higher levels of debt appear connected to lower future economic growth. Almost all debt accumulations have been hard to reverse, most have involved tough policy choices, and some notable ones have ended badly.

In this whitepaper, we discuss the state of global debt, how it came to be, where it may lead, and what we believe portfolio implications to be.

Emmanuel D. HatzakisDirector

Chief Investment Office

Christopher J. Wolfe Head of the Merrill Lynch


The state of global debtMore than eight years since the 2008 global financial crisis

started, the world seems to be drowning in debt. Global

economic growth, meanwhile, remains anemic, after years of

sluggishness. Some economists attribute it to high levels of

debt1, reasoning that they have been preventing economies

from realizing their full potential because governments,

businesses and households have been devoting significant

resources to debt servicing — resources that otherwise would

have been available for productive activities.

Global debt was on a steep rise before the crisis, and continued

growing after it. The McKinsey Global Institute estimates that,

by mid-2015, the world’s debt stood at $204 trillion — $68

trillion (or 50%) higher than it had been in 2007, immediately

before the crisis, and $121 trillion (or 145%) higher than in 2000.

Governments, businesses and households all contributed to the

increase. (See Exhibit 1.)

What is more, global debt has been growing faster than the

world’s economy. As of mid-2015, it stood at 294% of global

gross domestic product (GDP), up 25 percentage points (pp)

since the end of 2007 and 48 pp since the end of 20002. In

many countries, debt has increased to levels not normally seen

during peacetime3. In advanced economies, government debt

has had several spikes associated with wartime borrowing or

economic crises over more than two centuries, and is now at its

highest levels since World War II4 (see Exhibit 2). Businesses and

households have never been as indebted before5.

Exhibit 1: Global Debt Outstanding, by Type

2000 2007 Q2 2015

246% 269% 294%

250

200

150

100

50

0

$ Tr

illio

n, C

onst

ant E

xcha

nge

Rate

s

TOTAL DEBT AS % OF GDP

$19 $36 $48

$58

$57

$40

$204

+ $68

$37

$31

$32

$136

+ $121

$21$25$18$83

Household GovernmentBusiness-Non-Financial Business-Financial

Source: McKinsey Global Institute and Merrill Lynch Chief Investment Office. Note: Totals may be off due to rounding.

Global Debt: Challenges and Opportunities 2

Exhibit 2: Global Government Debt Outstanding — Advanced versus Emerging Economies

1800

1809

1818

1827

1836

1845

1854

1863

1872

1881

1890

1899

1908

1917

1926

1935

1944

1953

1962

1971

1980

1989

1998

2007

140

80

60

40

20

0

100

120

Debt

as

% o

f GDP

Advanced Economies Emerging Economies

Source: Reinhart, Reinhart and Rogoff (2012). Data through 2012 for advanced economies and through 2011 for emerging economies.

Emerging economies alone contributed 47% to the growth in

global debt since 2007. China, whose government launched an

ambitious stimulus program in late 2008, in response to the

global financial crisis, played a leading role6, with its debt more

than quadrupling since 2007 (see Exhibit 3). China’s debt is

mostly domestic, held by banks, and has been used primarily to

finance real estate and other investments.

Exhibit 3: China’s Outstanding Debt, by Type

2000 2007 Q2 2015

300

200

150

100

50

0

250

Debt

as

% o

f GDP

$1.9 $6.9 $30.0TOTAL DEBT, $ TRILLION, CONSTANT EXCHANGE RATES

7pp 24pp68pp

39pp

132pp

51pp

290%

72pp

20pp

42pp

158%

8pp

83pp

23pp

121%

GovernmentBusiness-Non-Financial Business - FinancialHousehold

Source: McKinsey Global Institute and Merrill Lynch Chief Investment Office.

How this came to beDebt has characteristics that make it attractive both to borrowers, as a source of funds, and to lenders, as an investment. Borrowers may like its favorable tax treatment, and the limited surrender of control rights it offers when compared to equity; lenders often perceive it as less risky than equity, and its contractually specified stream of cash flows may serve their needs with reasonable certainty. A confluence of factors contributed to the global debt accumulation7:

• In many economies, robust real GDP growth and

booming real estate markets and construction led to

fast increases in credit.

• The liberalization of the financial sector over the last three

decades opened up major financial markets, and innovative

ways to engineer debt instruments with risk profiles

perceived to be suitable for specific classes of lenders

fueled a self-reinforcing increase in credit availability.

• A savings glut, mainly in emerging economies, and

declining real interest rates across the world made

credit cheaper and more available.

• Credit use increased as both lenders and borrowers

felt more comfortable in a relatively stable

macroeconomic environment.

• The 2008 global financial crisis caused governments to

increase their borrowing steeply to offset tax revenue

declines and stimulate their economies.

Debt levels can increase in both good economic times and

bad. When growth is too weak, governments may attempt to

stimulate economic growth by investing or spending borrowed

funds, as well as adopt policies that encourage businesses

and households to invest or spend using credit. Several prior

periods of debt accumulation were followed by severe economic

contractions8, and what we are experiencing now may have

similarities to past cycles. The current secular debt cycle is now

more than five decades long, with deleveraging pauses in the

1980s and 1990s. It intensified in the last few years, raising

some critical questions:

• Should we be concerned?

• Does this pose any risks? If it does, is there a way out?


• Do we need to deleverage at any cost, or should we rather

focus on learning to manage the debt and its growth trends?

• Could it be that it does not matter as much as we fear? What

if debt has become a structural element of the modern global

economy, with its deep financial markets, sophisticated risk

management tools, and steadily declining interest rates to

historically low levels that make debt servicing as easy as it

has ever been?

• Finally, how should investor portfolios be positioned in this

environment?

Debt accumulations are historically associated with slower

future GDP growth, systemic instability, and economic and

financial-system vulnerability9. The faster the debt build-up,

the worse the ensuing contraction has tended to be. In the

years leading up to the global financial crisis, major advanced

economies saw household debt spiral upward to unsustainable

levels along with housing prices, until real estate collapsed and

domestic spending slowed, with more-leveraged households

experiencing larger spending slowdowns10. Faster private-

sector deleveraging and quicker balance-sheet recognition of

losses have resulted in more robust recoveries11.

The economic slowdown following debt accumulation is well

understood by those familiar with the aftermath of the lending

booms in the U.S. in the 2000s and Japan in the 1980s, and

research findings corroborate it12. Exhibit 4 outlines an illustrative

example. When domestic demand is fueled entirely by credit, $1

of borrowing generates $1 of spending, and the stock of debt

increases by $1, all else being equal. To keep demand at the same

level through credit, debt needs to keep increasing. When the

flow of credit stops, demand goes back to what it was before

borrowing, and the stock of debt remains at a high plateau. To

decrease debt, we need to reverse the credit flow, which causes

a contraction in demand. What is more, weak demand leads

to disinflation or even deflation, which, in turn, triggers easier

monetary policy, currency depreciation, and increased vulnerability

of the banking system to crises.

Since debt overhangs have often happened during or after deep

recessions, wars, or other crises, it is not clear whether anemic or

negative growth can all be blamed on high debt. Also, the impact

on growth depends on each economy. Emerging economies,

as well as countries that lack inclusive political and economic

institutions, are considered to be more adversely affected13.

Some deleveraging has been taking place since the crisis14,

but it has been uneven across economies.

Exhibit 4: Debt would rise perpetually in an economy relying solely on credit to sustain demand (depicted by dotted lines). If credit stopped flowing, demand would stagnate while the stock of debt stabilized, and it would contract if the credit flow reversed in order to deleverage.

$0

$0

$0

-$1+$1

+$1

-$1

-$1+$1

-$1

CREDIT

DEBT STOCK

DEMAND

$0 borrowed.

$0 debt build-up.

$0 demand.

$1 borrowed.

$1 debt build-up.

Demand expands by $1.

$0 borrowed.

$1 debt build-up unchanged.

$0 demand.

$1 paid back.

Debt stock falls $1.

Demand contracts by $1.

PERIOD 1 PERIOD 2 PERIOD 3 PERIOD 4

Source: Merrill Lynch Chief Investment Office.

Business debtA study by the McKinsey Global Institute found that business

deleveraging has been taking place in the developed world, with

debt-to-GDP ratios falling in the U.S. and a few other countries

and stabilizing elsewhere. The financial sector deleveraged

significantly in the years since the financial crisis, mainly as a

result of new regulations and stricter capital standards. While this

has made the sector more stable, it has also restricted availability

of credit to households and businesses15. The decline in corporate

bank lending has been somewhat offset by an increase in non-

bank credit. A significant part of the latter includes the issuance

of corporate bonds by larger companies, while share buybacks

have been increasing at a pace similar to that of bond issuance in

the U.S., according to Strategas Research Partners (see Exhibit 5),

as well as in Japan and, to a lesser degree, Europe.


Exhibit 5: Corporate bond issuance and S&P 500 buybacks have been increasing at similar paces

2015201420132012201120102009

3,000

2,500

2,000

1,500

1,000

0

500

$ Bi

llion

S&P 500 Buybacks Bond Issuance

Source: Strategas Research Partners and Merrill Lynch Chief Investment Office.Past performance is no guarantee of future results.Please see Appendix for index definition.

This trend may be indicative of a shift in the capital structure

of firms toward less equity and more debt. The rebalancing to

a lower cost-of-capital equilibrium in the current environment

of low or negative interest rates could be reflective of capital

market efficiency and deepening. Share buybacks have proven

rewarding to investors for several years, as Exhibit 6 shows.

Exhibit 6: Share buybacks have proven rewarding to investors for several years

1/2/2009 1/2/2010 1/2/2011 1/2/2012 1/2/2013 1/2/2014 1/2/2015 1/2/2016

400

250

200

150

100

300

350

50

S&P 500 Buyback IndexTotal Return*

S&P 500 Equal WeightTotal Return Index*

Source: Bloomberg and Merrill Lynch Chief Investment Office. *Bloomberg index tickers: SPBUYUT, SPXEWTR. Please see Appendix for index definitions. Past performance is no guarantee of future results.

Other forms of non-bank credit include transparent forms of

securitization, as well as lending by hedge funds, pension funds,

insurers, leasing and government programs, and the still small but

rapidly growing peer-to-peer lending platforms. All of these can be

vital sources of funding to smaller entities. Non-bank lending can

serve an important role in promoting economic growth by providing

needed credit to the private sector16.

Among proposals to better manage the growth in corporate debt

is reducing or phasing out the deductibility of interest, coupled with

reductions in marginal rates and other potential adjustments17.

Household debtHousehold spending and residential investment were credit-

financed to a large degree before the global financial crisis.

Since it broke out, households in the U.S. and several other

advanced economies, such as Ireland, the U.K. and Spain, have

been deleveraging18. This is being done mainly through a rise

in precautionary savings and paying down debt to weather the

economic uncertainty. Delinquency write-offs and reduced credit

availability for new mortgage, auto and credit card loans also

played a significant role. In the emerging world, household debt

has been rising at different rates across countries, with China

leading the trend, and is still at modest levels relative to income.

Real estate prices and household debt are highly correlated

in several economies because the larger the mortgages for

which home buyers are approved, the more they bid up house

prices. The link between mortgage debt and real estate prices

makes household debt hard to reduce19.

Central banks can be effective in managing mortgage credit

trends and house prices through the appropriate mix of

interest rate and macro-prudential policies20. These have been

found to meaningfully reduce real household credit growth and

house price growth21.

Among proposals to improve the stability of the home mortgage

market is requiring or encouraging homeowners to purchase

insurance that makes mortgage payments after a job loss

or other adverse event. Tax incentives, such as deductibility

of mortgage interest, could be reconsidered, since they lead

households to take larger mortgages to maximize tax benefits.

They mainly benefit high-income households, and contributed to

the unsustainable home price increases that caused the systemic

instability during the 2008 global financial crisis.

Innovative proposals, mainly by think tanks and academics,

include flexible mortgage contracts. By automatically adjusting

payments, a “continuous workout mortgage” would protect

homeowners during recessions, unemployment, or other triggers

impairing their ability to pay. A “shared responsibility mortgage”

has payments linked to the local house price index, and can

adjust downward if house prices fall, while the amortization

schedule remains the same, resulting in a principal reduction to

the homeowner. In turn, the lender would receive a portion of the

capital gains upon sale of the house, if it appreciates22.


Bankruptcy and foreclosure can be lengthy and costly. In their

place, several economists have advocated debt reduction through

renegotiation, mortgage principal reduction, refinancing and, for

certain types of household loans, such as unsecured credit card

debt, even forgiveness. Some point to historical evidence of voluntary debt forgiveness in ancient Mesopotamia, and the United States in the early 19th century and during the Great Depression23, and during biblical Jubilee years (Leviticus 25). Broader adoption of non-recourse loans outside

the United States, combined with sound macro-prudential

policies to prevent lending excesses, could speed up bad-debt

resolution, with lesser adverse impact to the economy24.

Sovereign debtCountries have typically borrowed to finance several

endeavors, including wars, investments in productivity-

enhancing projects (e.g., infrastructure), and fiscal policies

that stimulate economic growth through increased consumer

spending. The level of public debt a country can sustain is

determined by its ability to continue servicing it through

organic economic growth or access to more borrowing. When

the stock of debt rises above a “tipping point” that impairs

either or both of these sources, it ought to be reduced25. In the

absence of default or restructuring, debt build-ups can take a

long time, or be impossible, to eliminate. Deleveraging after

major financial crises typically takes longer and is more painful

than after wars and, in some cases, debt remains high or gets

even higher. In the current cycle, deleveraging started slowly in

the world’s major economies.

Debt-reduction episodes have involved “belt-tightening,”

elevated inflation, financial repression, stronger economic

growth, and default or restructuring26. Fiscal consolidation at

the right pace and speed27 has played a key role in reversing

public debt build-ups, as Sweden and Finland demonstrated

in the 1990s. After World War II, the U.S. and other countries

reduced their public debt through higher inflation and financial

repression28. France restructured hers after the Revolution and

Napoleonic Wars, and so did several European countries after

World War II. A number of emerging countries restructured

theirs under the Brady Plan in the 1980-90s29. Post-Brady Plan,

large restructurings include those in Argentina (2005), Greece

(2012), and Russia (1998)30. Britain, which twice in the last

three centuries ran enormous public debts, associated mostly

with wartime spending, deleveraged through primary budget

surpluses and robust economic growth (see Exhibit 7)31.

Exhibit 7: Public debt in Britain, 1700–2010

1810 1850 1880 191017501700 1920 1950 1970 1990 2010

250

150

100

50

0

200

% o

f Nat

iona

l Inc

ome

Source: T. Piketty: Capital in the 21st Century (see piketty.pse.ens.fr/capital21c).

Central banks around the world recognize the state of global debt

as the new normal and have been broadening their mandates,

using new tools or resurrecting old ones to manage it effectively.

Financial repression, which helps governments ease the burden of

debt service through artificially low or even negative interest rates,

borrowing from captive domestic sources (e.g., pension funds),

cross-border capital controls, and tighter connection with banks,

is making a comeback. When certain issuers’ heavy leverage is

perceived as a systemic risk, central banks bail them out, as the

Federal Reserve did with several financial firms in 2007 – 09. The

European Central Bank and other institutions did the same with

the eurozone’s periphery earlier in this decade, but the required

austerity exceeded the natural speed limit of fiscal consolidation

and caused a severe economic contraction in certain countries.

Some have proposed that central banks engage in fiscal

expansion by “printing money” — i.e., growing the monetary

base or the total bank reserves and currency in circulation,

and investing it in infrastructure and other projects, or even

dropping it to the population from “helicopters.” This approach

would allow governments to continue spending without the

need to accumulate more debt or raise new taxes. These

practices, termed “monetary finance,” are being discussed

more and more. We feel that they need to be researched more

and understood better, especially with regard to their potential

for giving rise to moral hazard issues and risk of loss of central

bank independence32.

In the conventional sense, deleveraging without default,

with as fast a return to robust economic growth as possible,

is considered a successful outcome after a debt build-up.

But, can economic growth be achieved during deleveraging?


Economic Growth During DeleveragingAchieving economic growth while deleveraging is hard but

possible, as Sweden and Finland demonstrated during the

1990s33. The two Nordic countries quickly recapitalized or

nationalized banks and set up institutions to dispose of bad

loans, thus ensuring stability in the banking system. They cut

government spending at a pace that put debt under control

without threatening long-term fiscal sustainability. They adopted

meaningful structural reforms, including joining the European

Union, which attracted foreign investment and helped exports,

and enacted measures to boost productivity and growth in

sectors such as retail and banking. Their exports rose by almost

10% annually in mid-decade, through a focus on a few export-

oriented sectors and companies, and currency depreciations.

Private investment revived and helped growth during the late

stages of deleveraging. Finally, a stabilized housing market

and a rebound in construction helped the economy return to

normal conditions. Ireland’s recent success could be even more

remarkable: The country grew while deleveraging in the arguably

more challenging, post-2008, economic environment and within

the confines of the European common currency.

The Conference Board proposed two policy levers as key to

a successful sovereign debt resolution without the need for

harsh austerity measures or stimulus programs that could add

to debt accumulation: productivity-driven GDP growth, and

constant per-capita government spending over medium-term

planning horizons. The fiscal surplus that would emerge could

eventually reduce debt-to-GDP ratios34.

Economies can grow while deleveraging even with weak or no

credit growth, especially after banking crises and credit booms35.

Examples include the U.S. and Japan after the Great Depression

and the U.K. in the 25 years following World War II. The U.S.

experienced real GDP growth even though debt-to-income ratios

were declining since the trough of the 2008 global financial crisis.

In these and similar cases, the flow of credit remained positive,

even though the stock of debt was shrinking36.

The role of default or restructuring in achieving successful outcomesSometimes, defaults and/or restructurings are inevitable, and

decisive action is generally the fastest way to deleverage and

return to growth37. Such episodes can be painful in the short run,

forcing investors to take significant losses38. However, if executed

in a careful and orderly manner, a restructuring can lead to

sustainable long-term economic growth and a rise in asset prices,

as historical evidence shows (see Exhibit 8).

Liquidity crunch versus solvency crisis A country can get heavily in debt for various reasons, and may not

have cause for concern. If it temporarily lacks, but expects to soon

have, the funds it needs for debt service, interim financing or at

most an extension of bond maturities can relieve the liquidity

crunch. But if it both lacks liquidity and, given meager economic

growth prospects, is not expected to be able to generate the

income and fiscal surpluses needed to service its debt in the

future, more decisive actions may be in order. Such actions

include debt rescheduling (i.e., lengthening of maturities, possibly

involving lower interest rates), debt reduction (i.e., a “haircut” in

the nominal value of debt) or, in the most undesirable case, a

disorderly default, whereby the country fails to make principal or

interest payments on schedule.

A liquidity crunch should not be mistaken for a solvency crisis,

or vice versa, and the key to resolution is an accurate case-by-

case diagnosis39.

It is hard to diagnose certain cases ex ante. What initially may

seem just a liquidity crunch could be more serious and deteriorate

into a solvency crisis, and may require that it be treated as such.

In early 2010, few had foreseen the severe downward spiral that

the Greek economy would enter as austerity measures were

implemented. These measures significantly impaired the country’s

ability to service its debt, and will continue doing so in the absence

of an effective resolution40. In a similar manner, as the 2008 global

financial crisis was unfolding, the U.S. financial institutions that

failed, or nearly did so and had to be rescued, were those that

had not been aggressive enough in raising adequate capital to

remain solvent through the worst-case scenario that materialized.

Even if a solvency crisis is diagnosed, a variety of factors involving

multiple stakeholders and political constituents may impede

administration of the necessary remedies.

Defaults, restructurings and market accessPotential investors duly avoid the country’s public and private

assets for as long as any uncertainty remains that its troubles

are over and there is almost no chance that a relapse will force

them to assume any future losses. The caution is not limited

to the public sector; it also encompasses the private sector. In

fact, businesses in a defaulted, or otherwise financially troubled,

domicile are hurt more than the sovereign borrower, as their

access to capital markets is severely restricted for as long as

their home country’s financial situation remains unresolved41.

Investors will eagerly come only after all past losses have been

assigned. The safest way to achieve this is to take decisive


Exhibit 8: After sovereign debt restructurings, equity markets in seven of ten countries strongly outperformed global equities, and three underperformed them

We identified ten sovereign debt restructuring cases over the last three decades and examined the performance of a hypothetical investment in each country’s equity market made at the end of the month during which the restructuring was completed and held for two yearsa. By the end of the two-year period, on the basis of price returns, seven of the ten investments would have outperformed the MSCI All Country World Index (ACWI) by an average of 92.0%, and three would have underperformed it by an average of 37.8%. Eight of the ten would also have had positive absolute price returns.

6 9 12 1530 18 21 24

125%

50%

-50%

25%

100%

0%

-25%

75%

Rela

tive

Daily

Pric

e Re

turn

vs.

MSC

I ACW

I (US

D, %

)

Months Since Sovereign Debt Restructuring

-37.8%

92.0%

Average of Seven Outperformers Average of Three Underperformers

Sovereign Debt Restructuring Caseb Equity Market Price Returns (2-year post-restructuring, end-of-period, USD, %)

Country Completion Date Performance Period Absolutec Relative to MSCI ACWId

Mexico March 1990 03/31/1990 – 03/31/1992 295.4% 292.6%

Average:92.0%

Argentina January 2005 01/31/2005 – 01/31/2007 161.5% 128.1%

Philippines April 1992 04/30/1992 – 04/30/1994 134.5% 109.3%

Russia November 1998 11/30/1998 – 11/30/2000 83.4% 74.1%

Greece March 2012 03/31/2012 – 03/31/2014 50.6% 27.3%

Poland October 1994 10/31/1994 – 10/31/1996 28.3% 8.5%

Brazil April 1994 04/30/1994 – 04/30/1996 28.4% 3.8%

Argentina April 1993 04/30/1993 – 04/30/1995 8.9% -9.9%Average:

-37.8%Jordan December 1993 12/31/1993 – 12/31/1995 -3.9% -24.2%

Peru March 1997 03/31/1997 – 03/31/1999 -39.8% -79.3%

Source: Bloomberg and Merrill Lynch Chief Investment Office. The graph shows average daily price returns of the MSCI equity market index over the seven countries that outperformed and over the three that underperformed the MSCI ACWI during the two-year performance period after a restructuring. Past performance is no guarantee of future results. Please see Appendix for index definitions.

a. Each country’s MSCI equity market index was used to represent its equity market. As a requirement for inclusion in our sample, MSCI must have been offering a continuous daily series of the country’s equity market index at the time of, and for the two years following, the end of the month during which each restructuring was reportedly completed. We chose a single index provider — rather than a mix of index providers — for the benefit of a uniform equity market index calculation methodology. As a result, several restructuring cases for which MSCI country equity market index data were not available for the aforementioned time period were excluded from the sample.

b. All cases except Argentina 2005, Greece 2012, and Russia 1998 were Brady Plan restructurings of distressed sovereign debt.

c. Based on the MSCI equity market index for each country during the two-year performance period after a restructuring, as shown.

d. Calculated as the difference between absolute price returns of each MSCI equity market index and the price return of the MSCI ACWI during the same performance period.


action to make public debt sustainable in the present. For

example, after the Brady Plan restructurings finally eliminated

debt overhang in countries that had defaulted on commercial

bank loans in the 1980s, investors responded with a wave of

capital inflows to the relieved sovereigns, whose stock markets

rallied, economies benefitted from new investment and grew,

and capital market access was restored42.

There is no sovereign bankruptcy court, and “gunboat diplomacy”

seems to be a relic of history. In their absence, what motivates

countries to pay their debts? The common assumption that they

try to preserve their reputation as responsible borrowers is not

supported by recent evidence43. In reality, governments typically

tend to avoid default to contain political costs to incumbent

governments44. A timely and orderly default and restructuring

allows a country to receive rating upgrades and borrow again

soon45. This is because global interest rates and liquidity

conditions, decreased investor risk aversion during lending booms,

yield-seeking attitudes, and portfolio manager strategies and

incentives are stronger determinants of sovereign capital flows

and market access46.

Yet, while default frequency does not seem to affect future

market access, it appears that the magnitude of the most

recent default likely plays a role: Restructurings involving

deeper “haircuts” are associated with significantly higher

subsequent bond yield spreads and longer periods of capital

market exclusion47. As a special case, Argentina, whose long

absence from global markets was caused by holdout creditor

litigation, is again reissuing external sovereign debt. In line

with research evidence, it is being well received by global

investors, and it will be interesting to analyze its performance

in the medium to long term48.

The outlook for debt and growthGovernment debt crises might not have happened, or their

effects might have been significantly attenuated, had better

risk sharing been practiced. Today’s sovereign lenders and

borrowers may draw some lessons from the Spanish Empire

of the 16th century (see feature box).

Today, sovereign borrowers could make their debt service

contingent on their GDP growth rates. After World War II,

John Maynard Keynes negotiated such a clause in a U.S. loan

The King of Sovereign DefaultKing Philip II (1527-1598) of Spain ruled for most of the

second half of the 16th century over an empire spread

across three continents, one of the largest and richest in

history. His wealth and power did not prevent him from

defaulting four times. Yet, his serial defaults on sovereign

debt comparable to today’s levels relative to the size of

his empire’s economy did not cause systemic problems or

severe economic downturns.

King Philip’s bankers pooled risk through loan syndication,

whereby many investors of small and medium-sized wealth

participated in the lending. They also shared risk and

reward with him by agreeing to debt service contingent on

the evolving financial conditions of the crown. King Philip

issued mostly short-term debt under flexible clauses—

for example, making debt service contingent on the size

and arrival date of the annual silver deliveries from the

Americas. Lending to him was profitable, with average

annual returns of 15% or more, even after factoring in

his insolvencies49. Image Source: iStock.


to the U.K.50 Countries could issue securities with equity-like

features — e.g., bonds with coupons linked to the country’s

economic growth51 and, hence, the country’s ability to service

its debt. Government debt crises could be avoided through use

of such securities. During an expansion, higher coupons would

allow investors to share in the country’s prosperity. Conversely,

a contraction would not necessarily cause a debt crisis, since

lower coupons could protect the country’s ability to service

its debt without raising tax rates or cutting spending, both of

which could deepen the contraction. Lower coupons could also

prevent a default or restructuring.

Securities with such characteristics have started to be used

by governments, or have been envisioned and recommended

as viable means of public funding. They present new

opportunities to attenuate or prevent insolvencies:

• GDP-linked warrants, whose payments are triggered when

a country’s economy meets pre-established growth targets,

have been offered as part of bond exchange packages in

sovereign debt restructurings, most notably by Argentina in

2005 and Greece in 2012. Economic statistics as reported

by the issuing country will have to be used for valuing these

securities, and hence their reliability must be a factor in

investment decisions52.

• Equity-like shares representing claims on a country’s GDP

have been proposed53 or already issued54. Such securities have

even been envisioned for the United States55.

• Commodity-linked bonds can sidestep GDP-related

issues because they derive their value from the price of

a commodity that a country produces and sells. In certain

countries, a single commodity accounts for a major share of

GDP, such as copper in Chile, crude oil in Russia, Nigeria, Saudi

Arabia and Venezuela, and potentially natural gas in Cyprus in

the future56.

Proposed automatic restructuring mechanisms would trigger

lower coupons, longer maturities, and conversion to equity-like

instruments upon a pre-defined triggering event — for example,

when the debt-to-GDP ratio reaches a certain threshold57.

We ought to point out a critical difference between securities

that investors will want to buy based on their superior risk-

return characteristics, and securities that investors are forced

to receive as part of a sovereign debt restructuring. When

designing, structuring and offering such securities, political,

social, economic, moral hazard, financial engineering, and a

multitude of other public funding issues ought to be better

understood and addressed, and incentives for all stakeholders

must be aligned as best as possible58.

Portfolio implicationsWhile credit fuels economic growth, there comes a point

where rising global debt leads to muted future economic

growth. This implies low expected returns and higher volatility

for assets. Investors would be well advised to practice sound

risk management and take the long-term view with portfolio

positioning, since research evidence and experience indicate

these trends play out over very long horizons. That said,

there can be cyclical moves within the secular trends of

debt and growth that may present tactical positioning

opportunities — for example, in response to central bank

actions or sovereign debt resolutions.

Equities or traded debt of entities with low leverage or in

the process of deleveraging are attractive. This holds true

for all types of debt — government, business and household.

For governments, a lighter debt load to service means more

financial resources available to productively deploy elsewhere.

Less indebted businesses have more funds available to invest

for growth — through capital expenditures, acquisitions, or

research and development — or return money to shareholders

through higher dividends or share buybacks. Finally, households

with stronger balance sheets can fuel economic growth and

corporate profits through more robust consumption, and fewer

delinquencies and foreclosures if and when the economic

cycle turns.

The benefits of deleveraging are most directly observable in

cases where there has been quick and decisive resolution:

Equity markets of countries that have just restructured their

debt are very likely to rally in the short to medium term

(see Exhibit 8 again). There are multiple reasons for this.

Countries whose economies were stifled under heavy debt

service are all of a sudden relieved from the burden and have

at their disposal resources to pursue pro-growth activities.

A portion of their resources comes from renewed access to

debt markets, and this is also true for their corporations. The

credit cycle affects equity returns, and attempts to time it

may be informed by historical experience and other factors.

Equity market underperformance has followed periods of

rapid credit build-ups, especially in emerging economies, so

this is a valuable metric to track and use as a guide for asset

allocations in portfolios.


For fixed income investors, sovereign spreads of countries and

corporate spreads of firms that have low leverage are viewed

as relatively safer and therefore enjoy tight spreads. Spreads

of countries that recently deleveraged are narrowing, those

of countries still deleveraging are likely to narrow, and so are

those of corporates. This points to strong balance sheets and

high quality in both sectors.

Debt accumulation, deleveraging and credit flow trends impact

demand for commodities as a function of economic growth,

and by commodity type depending on each economy’s specific

characteristics.

Real estate is driven to a large extent by the credit cycle,

interest rates, and macro-prudential policies. Prices are positively

correlated with credit flows and inversely correlated with interest

rates and tightening lending standards. Investors with a long-

term horizon could take advantage of opportunities presenting

themselves as the credit cycle unfolds, together with asset values

and prices in each geography.

Acknowledgments: We are grateful to Susan Lund at the McKinsey Global Institute and Roy Butta at Strategas Research Partners for making analyses available for our use. We would also like to thank Ricardo Penfold of Goldman Sachs Asset Management, Ralf Preusser and Athanasios Vamvakidis of BofA Merrill Lynch Global Research, and Karin Kimbrough, Niladri Mukherjee and Rodrigo Serrano of the Merrill Lynch Chief Investment Office for providing thoughtful feedback.


Endnotes 1 See, for example, Lo and Rogoff, 2015. The authors include debt overhang among

the possible explanations for sluggish growth. Others they include are a secular deficiency in aggregate demand, slowing innovation, adverse demographics, lingering policy uncertainty, post-crisis political fractionalization, insufficient fiscal stimulus, and excessive financial regulation. We argue that it is too soon to tell, and add underinvestment in productive resources, lower labor productivity, and (in the case of the U.S.) weak demand from abroad as potential contributing factors to the slower growth.

2 McKinsey Global Institute analysis, March 2016. 3 The term “peacetime” is used loosely, since several countries have been involved

in conflicts during the global debt build-up. For example, the wars in Afghanistan and Iraq may have contributed significantly to the U.S. stock of debt.

4 See Reinhart et al., 2012. 5 See Reinhart and Rogoff, 2011. 6 See McKinsey Global Institute, 2015. 7 See Buiter and Rahbari, 2012. 8 See Reinhart and Rogoff, 2009. 9 Results are based on analyzing extensive datasets assembled by researchers (e.g.,

Barro and Ursua, 2008, Devries et al., 2011, Reinhart et al., 2012, Jorda et al., 2013, 2015, McKinsey Global Institute, 2012, Medas et al., 2013, and Schularick and Taylor, 2012).

10 Mian and Sufi, 2014, present compelling evidence of a link between rising household debt levels and a subsequent spending slowdown affecting all households, and not only the most leveraged ones, even though the latter experienced larger cuts in spending. See also Dynan et al., 2012. Interestingly, balance-sheet adjustments were limited even for households most affected by the crisis, as reported by Cooper, 2013.

11 See Chen et al, 2015. 12 Reinhart and Rogoff, 2010, found that after government debt has exceeded 90%

of GDP, median growth rates have been one pp lower, and mean rates even lower. Kumar and Woo, 2010, found that, for every 10 pp that the starting debt-to-GDP ratio is higher, the subsequent real per-capita GDP growth can be 0.2 pp lower, with emerging economies more severely impacted than advanced economies.

13 See Acemoglu, D., and J. Robinson, 2012. 14 See McKinsey Global Institute, 2015. 15 The riskiest forms of shadow banking, including repos, CDOs, CDSs, and off-

balance-sheet securitization vehicles, have been in a material decline since 2007. The unwinding of a global financial system that had become excessively complex, opaque and ultimately unstable and vulnerable to shocks is a welcome development (see McKinsey Global Institute, 2015).

16 The growth of non-bank lending ought to be carefully managed, as hidden risks and leverage may be building and could cause systemic instability until detected. A sound regulatory framework, with appropriate reporting requirements and monitoring mechanisms, can reduce its role as a source of systemic risk.

17 Tax code changes are always challenging, and this could prove a thorny policy matter, but would have the additional benefit of better capital structure and allocation decisions in firms, by increasing the relative attractiveness of equity versus debt, and labor versus capital goods investments.

18 Notable exceptions include the Netherlands, Denmark and Norway, where household debt as a percentage of household income has been rapidly increasing.

19 House prices are also driven by factors such as land scarcity, regulatory rules and urbanization. Monitoring mortgage debt trends, especially in major urban centers with high real estate prices, is therefore one of the most important policy matters (McKinsey Global Institute, 2015).

20 Macro-prudential policies could help control total leverage in an economy by limiting credit growth. They may include limitations on loan-to-value (LTV) and debt-service-to-income (DSTI) ratios, restrictions on interest-only loans and other types of mortgages, bank capital requirements, and other underwriting rules and banking regulations (see Kuttner and Shim, 2013).

21 See, for example, Jarocinski and Smets, 2008, and Iacoviello and Neri, 2010. 22 Shiller et al., 2011, discuss continuous workout mortgages, and Mian and Sufi,

2014, shared responsibility mortgages. Any misalignment of interests between homeowners and lenders in contract design, and the fact that their risk-sharing features may disqualify them as debt instruments, making their mortgage interest ineligible for tax deduction, could prevent widespread adoption of shared responsibility mortgages.

23 Mian and Sufi, 2014. “Debt Forgiveness in History,” houseofdebt.org, May 18 (accessed on November 27, 2015).

24 Non-recourse loans, broadly used in the United States, give creditors rights only to a defaulted loan’s collateral and do not allow claims on the borrower’s future income or other assets. This helps write off debts quickly and prevents severe disruptions to households’ economic life. On the other hand, recourse loans, common in many parts of the world, allow creditors to seize assets other than a defaulted loan’s collateral, or lay claim on the borrower’s future income. As borrowers slash spending to commit more funds to debt service in their efforts to avoid default at all costs, recessions can deepen and lengthen (see, for example, McKinsey Global Institute, 2015).

25 See, for example, Ostry et al. 2015. 26 For a detailed discussion, see McKinsey Global Institute, 2012. 27 See Alesina and Ardagna, 2010. 28 A good analysis can be found in Reinhart and Sbrancia, 2011. 29 Most Brady Plan deals took place in Latin American countries — i.e., Argentina,

Bolivia, Brazil, Costa Rica, Dominican Republic, Ecuador, Mexico, Panama, Peru, Uruguay and Venezuela. Others took place in Bulgaria, Ivory Coast, Jordan, Nigeria, the Philippines, Poland and Vietnam. Morocco was going to, but eventually did not, participate (see Das et al. 2012).

30 For a complete list of sovereign debt restructurings from 1950 to 2010, see Das et al., 2012.

31 For a discussion on France’s restructuring of Revolutionary and Napoleonic debts, and Britain’s debt reduction through fiscal prudence and economic growth, see Piketty, 2014.

32 For details, see Turner, 2015. Bernanke, 2016, emphasizes implementation issues. A related discussion can be found in Montier, 2016.

33 See McKinsey Global Institute, 2010, 2012. 34 See Sexauer and van Ark, 2010. 35 Resources on creditless recoveries include Abiad et al., 2011, Bijsterbosch and

Dahlhaus. 2011, Takats and Upper, 2013, and Constancio 2014. Some researchers call recoveries without a rebound in credit “Phoenix Miracles”; see, for example, Calvo et al., 2006, and Biggs et al., 2010.

36 See Dalio, 2015. 37 Levy-Yeyati and Panizza, 2011, have demonstrated that the costs of delaying a

needed default, in terms of output losses, are more significant than the default itself, which often marks the end of economic malaise and the beginning of strong economic recovery for the defaulting sovereign. The timing of default or significant debt restructuring hence is a crucial policy matter, and policymakers’ efforts to postpone a default that has been widely anticipated and priced in by the market may be misguided (see Zettelmeyer et al., 2013). This is demonstrated by the cases of Greece and Puerto Rico, both of which are constrained by their inability to print money, and by the political complexities within the union that each is part of.

38 The “haircuts” in some recent restructurings ranged from 13% (Uruguay in 2003) to 73% (Argentina in 2005). See Sturzenegger and Zettelmeyer, 2008.

39 See, for example, International Monetary Fund, 2013-2015, and Das et al., 2012. Voth, 2014, defines sovereign debt sustainability as a country’s expected value of future primary fiscal surpluses. Net debt, which excludes borrowing by central banks and other government agencies, enables a better assessment of sustainability. A common error when treating a solvency crisis as a liquidity problem is trying to make an entity’s debt sustainable at a future date. The assumption is that the entity’s economy will have recovered enough over some period to make its debt sustainable and serviceable then, because it will be a certain lower percentage of GDP than it is at present. This assumption is


particularly misguided in that it supposes that we know exactly what will happen on the path to debt sustainability five to ten years from the present.

40 In three articles published after the Greek sovereign debt restructuring in 2012, Barrionuevo et al. argue that Greece’s solvency crisis was initially misdiagnosed as a liquidity crisis, and treated through temporary financing that proved ineffective and became a permanent burden to the country and a potential future write-off to its rescuers.

41 See Arteta and Hale, 2008, and Das et al., 2010. 42 See Arslanalp and Henry, 2005. Success proved unsustainable for some Brady

Plan countries (see Chuhan and Sturzenegger, 2005). Arslanalp and Henry 2006 contend that for poorer sovereigns, debt forgiveness entails a superficial boost if unaccompanied by policies that promote significant reforms to weak local economic institutions partially responsible for these countries’ malaise.

43 Eaton and Gersovitz, 1981 present analysis on countries’ credit access that supports the common assumption that countries avoid default to steer clear from reputational damage that could severely restrict new credit or make it more costly. Yet, beyond disputable centuries-old experience (see Tomz, 2007), contemporary evidence for this assumption is weak (see Panizza et al., 2009, and Datz, 2014). Sovereign debtors’ market access was not determined by their default records during the debt crises of the 1930s and the 1950s credit boom (see Lindert and Morton, 1989).

44 Borensztein and Panizza, 2009 contend that the main motivation to avoid default is limiting political costs rather than preserving reputation, preventing international trade exclusion, or limiting costs to the domestic economy through the financial system.

45 Gelos et al., 2011, did not find market access to be a function of a country’s frequency of defaults, and, when resolved quickly, past defaults did not prevent sovereigns from obtaining fresh funds in financial markets.

46 Time horizons tend to be longer-term for investors and shorter-term for managers, since performance must be reported monthly, quarterly and annually. Compensation through performance fees also shortens the investment time horizons of these managers. Therefore, when liquidity is plentiful, industry incentives point toward assets and economies that provide relatively higher yields and growth prospects, regardless of a (recent) history of default (see Datz, 2009).

47 See Cruces and Trebesch, 2011. Results perhaps reflect market caution toward a sovereign based on the degree to which it got itself in trouble in the past.

48 Despite its debt restructurings of 2005 and 2010, after its 2001 default, Argentina has not issued debt internationally given pending litigation with holdout creditors in U.S. courts. Not issuing bonds abroad is a high cost to pay for default, but not always one imposed by unwilling foreign creditors; in Argentina’s case, it is being forced by a minority of holdout bondholders. The distinction may seem subtle but, given increased concern now with the serious threat holdouts pose to sovereign debt restructuring deals, it is warranted, and significant effort is being undertaken on appropriate Collective Action Clauses (CAC) to include in future bond offerings to mitigate this threat and facilitate a needed restructuring (see Gulati and Buchheit, 2011).

49 See Drelichman and Voth, 2014. 50 See Griffith-Jones et al., 2011. 51 See Shiller, 1993, and Borensztein et al., 2004. 52 See Shiller, 2004, Griffith-Jones and Sharma, 2006, and Griffith-Jones and Hertova,

2012. Although attempts have been made to rigorously value these instruments (e.g., Miyajima, 2006, Ruban et al., 2008) and market experience with the Argentine warrants has been quite rewarding for investors, a number of issues ought to be better understood before GDP-linked warrants become widely accepted. An entity issuing GDP-linked securities signals its willingness to share its future expected economic prosperity with investors, to a certain degree, even if the securities have embedded redemption features or are somehow callable. Moral hazard around an entity’s GDP and inflation figures must be accounted for. These may be reported in a manner that lowers warrant payments resulting in losses to investors; or they could be manipulated to increase payments in certain years to create, or revive, interest in the securities, to the detriment of the entity’s taxpayers. In each case, economic statistics can be revised to their true values at a later time. Therefore,

issuing GDP-linked warrants must be accompanied by robust procedures, controls and audits around the preparation and reporting of economic statistics, and their structure should allow coupon payment adjustments upon revisions in the figures used to calculate them. Adverse selection could also play a role. Entities that believe or know themselves to have weak economic prospects may prefer to issue GDP-linked warrants structured in a manner that makes them look attractive but secures a future stream of low coupon payments; conversely, those with strong confidence in their prospects would choose to structure GDP-linked securities so their future payment stream resembles that of fixed-coupon debt. Hence, moral hazard around an entity’s GDP, and a few other issues, ought to be better understood and accounted for before GDP-linked warrants become more broadly accepted.

53 Griffith-Jones and Shiller, 2006, contend that “GDP-linked bonds” would create markets for countries’ economies. In contrast, they contend, stocks are claims on net corporate profits that can constitute as little as 10% of GDP. Similar market signaling and information issues (moral hazard and adverse selection) could exist for these securities as with GDP-linked warrants. If properly constructed, portfolios of such securities from several countries could offer investors true global diversification.

54 The “New Singapore Shares,” issued in 2001, paid a minimum dividend of 3%, plus the country’s real annual GDP growth rate, with no claw-back in years when it would be negative.

55 Kamstra and Shiller, 2009, proposed that the U.S. Treasury issue a new security with a coupon tied to the current GDP of the U.S. Because the coupon of this security might, per their proposal, equal one-trillionth of the country’s GDP, they suggest the security be called a “trill.” Shiller, 2013, demonstrates through examples how this might work. A U.S. trill held by an investor during 2011 would have paid the holder a coupon of USD 14.50, since the U.S. GDP was about USD 14.5 trillion in 2011. A Canadian trill would have paid CAD 1.81, with the country’s GDP at CAD 1.81 trillion. The security’s coupon would be determined in a similar manner for each trill-issuing country. And it could effectively protect its debt servicing ability: A Greek trill would have paid a 2008 coupon of EUR 0.23; the same trill’s coupon for 2013 would be estimated at EUR 0.18, about 21% lower, consistent with the magnitude of the country’s economic contraction during the period. Had the country issued trills several years ago, it might not have needed the bailouts, debt restructuring, and draconian programs of austerity.

56 GDP in each of these countries is highly correlated with that commodity’s price, which is transparently set in global markets and can be assumed to be free of the risk of sovereign manipulation of GDP and inflation statistics. However, moral hazard could remain a problem, especially in the case of a country that has the power to manipulate a commodity’s price because it controls a sizable share of its global production and supply. Price manipulation can be particularly severe when practiced by groups of countries producing the same commodity, as in the case of crude oil.

57 See, for example, Steinhauser, 2013, and Mody, 2013. This would work in a manner similar to the case of contingent convertible bonds (CoCos) issued by companies, which are issued as bonds and can later convert to equity. If the borrowing decision-making process is deliberately manipulated and a sovereign’s debt pushed past the restructuring trigger thresholds by a little more borrowing, moral hazard can lead to adverse selection.

58 Also, there is a difference between countercyclical mechanisms that ease the burden of debt repayment in economic downturns as opposed to a more specific group of assets based on automatic/mechanical approaches such as those proposed in the case of CoCos. The latter could be subject to moral hazard, which can undermine the integrity of the process. A better approach is to pursue a careful case-by-case debt analysis and negotiation. The renewed effort in official and legal circles to design a sovereign debt restructuring mechanism in light of the increased threat of holdout creditors and Greece’s lingering difficulties is welcome (see Committee on International Economic Policy and Reform, 2013), but a universally effective construct may be hardly feasible. Political, legal and financial strategies are adaptive. A framework that allows flexibility to accommodate the idiosyncrasies of each case and takes advantage of innovative financial products may not be ideal, but is certainly promising for all parties involved.


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AppendixIndex Definitionsa

Standard and Poor’s (S&P) 500 Index: A market capitalization-weighted free float-adjusted index of 500 large-capitalization U.S. stocks. It captures approximately 80% of available market capitalization. The index was developed with a base level of 10 for the 1941-43 base period.

S&P 500 Equal Weight Index: The equal-weight version of the S&P 500.

S&P 500 Buyback Index: An equal weighted index designed to measure the performance of the top 100 stocks with the highest buyback ratios in the S&P 500.

MSCI All Country World Index (ACWI)b: Captures large- and mid-capitalization representation across 23 Developed Market (DM) and 23 Emerging Market (EM) countriesc. It was developed with a base value of 100 as of December 31, 1987. With 2,482 constituents, the index covers approximately 85% of the global investable equity opportunity set.

MSCI Argentina Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Argentine market. It was developed with a base value of 100 as of December 31, 1987. With nine constituents, the index covers about 85% of the Argentine equity universe.

MSCI Brazil Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Brazilian market. It was developed with a base value of 100 as of December 31, 1987. With 60 constituents, the index covers about 85% of the Brazilian equity universe.

MSCI Greece Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Greek market. It was developed with a base value of 100 as of December 31, 1998. With ten constituents, the index covers about 85% of the Greek equity universe.

MSCI Jordan Equity Market Indexb: Measures the performance of the Jordanian market. It was developed with a base value of 100 as of December 31, 1987.

MSCI Mexico Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Mexican market. It was developed with a base value of 100 as of December 31, 1987. With 27 constituents, the index covers about 85% of the free float-adjusted market capitalization in Mexico.

MSCI Peru Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Peruvian market. It was developed with a base value of 100 as of December 31, 1992. With three constituents, the index covers approximately 85% of the Peruvian equity universe.

MSCI Philippines Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Philippines market. It was developed with a base value of 100 as of December 31, 1987. With 22 constituents, the index covers about 85% of the Philippines equity universe.

MSCI Poland Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Polish market. It was developed with a base value of 100 as of December 31, 1992. With 23 constituents, the index covers about 85% of the Polish equity universe.

MSCI Russia Equity Market Indexb: Measures the performance of the large- and mid-cap segments of the Russian market. It was developed with a base value of 100 as of December 30, 1994. With 20 constituents, the index covers about 85% of the free float-adjusted market capitalization in Russia.

a. Index definitions in this Appendix are based on information available at the index providers’ websites and on Bloomberg as of March 31, 2016.

b. The MSCI ACWI and all MSCI Country indices defined in this Appendix are free-float market capitalization-weighted.

c. DM countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the U.K. and the U.S. EM countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.

Christopher J. Wolfe Head of the Merrill Lynch Chief Investment Office

Mary Ann BartelsHead of Merrill Lynch Wealth

Management Portfolio Strategy

Karin KimbroughHead of Macro and Economic Policy Merrill Lynch Wealth Management

Niladri MukherjeeManaging Director


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Director

Jon LieberkindVice President

JohnVeit

Vice President

Christopher HyzyChief Investment Officer

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