Why investors should pay more attention to debt

Across the globe, governments, companies and individuals are racking up eyewatering amounts of debt. Global debt surpassed $320tn (£253tn) by the end of the third quarter of this year, according to the Institute of International Finance, which warned that "large government budget deficits suggest a rapid acceleration in borrowing over the next four years". The IMF forecasts that worldwide public debt will exceed $100tn by the end of 2024 and that, by the close of this decade, the global debt-to-GDP ratio will near 100 per cent.

The obvious question is: to what extent are these rising debt levels a problem? The historical record contains numerous warning signs about borrowing laxity, from the Asian financial crisis of 1997-1998 to the 2008 financial crisis. Such periods highlight that financial markets can suffer greatly from wider debt problems. And there are now more prominent factors which limit the potential to reduce these burdens down, from demographic pressures that come with ageing populations to costs associated with climate change commitments.