A subscriber asked whether risk assets tend to struggle for about two years after low values of the ratio of corporate debt to Gross Domestic Product (GDP). To investigate, we use Non-financial Corporate Debt Securities and Loans as a proxy for corporate debt. Both debt and GDP series are quarterly, seasonally adjusted and have release delays of about one quarter. We then form the corporate debt-to-GDP ratio and relate its behavior to that of the S&P 500 Index. Using quarterly data for the three series from the fourth quarter of 1951 (limited by availability of quarterly data for the debt series) through the second quarter of 2021 for the economic/financial series and the third quarter of 2021 for the S&P 500 Index, we find that:
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