We can't ignore the enduring problem of unemployment and underemployment. While the Bureau of Labor Statistics lists the unemployment rate at 4.1%--a 17-year low--the seasonally adjusted U6 unemployment rate, which takes into account eligible workers who can't find full-time jobs and those who have given up trying altogether, stands at 8.2%. The fact is that automation and other technological innovations are accelerating job displacement, reducing costs, and increasing corporate margins and profits. This benefits investors with the liquidity available to participate in financial markets, but certainly not average families living from paycheck to paycheck, or without a paycheck at all.

While Fed policies helped household balance sheets to deleverage after the 2008 financial crisis, they did so by effectively transferring household debt to corporate and sovereign balance sheets, paving the way for higher interest rates. Outstanding non-mortgage consumer credit has risen by 45% since its previous peak in 2008, now approaching $4 trillion. Global nonfinancial corporate debt increased to 96% of global GDP between 2011 and 2017, with some 37% of global companies now deemed to be "highly leveraged," (meaning they have a debt-to-earnings ratio above five-to-one) up from 32% in 2007, according to Standard & Poor's. And the level of margin debt used to buy securities has doubled since 2011, to a new all-time high of $643 billion. Nearly one in five American companies now qualify as "zombies," meaning that earnings before interest and taxes don't cover interest expenses.

All of this suggests a new cycle of distressed corporate credit looks to be just around the corner, and recent tax reforms limiting corporate interest deductibility won't help.

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