Insight Article Desktop Banner
 
 
Consilient Observer
  •  
Februar 28, 2024

Cost of Capital and Capital Allocation: Investment in the Era of “Easy Money”

Insight Video Mobile Banner
 
Februar 28, 2024

Cost of Capital and Capital Allocation: Investment in the Era of “Easy Money”


Consilient Observer

Cost of Capital and Capital Allocation: Investment in the Era of “Easy Money”

Share Icon

Februar 28, 2024

 
 
  • We examine the counterintuitive behavior of U.S. public companies in the recent regime of “easy money,” the period of below-average interest rates from 2009 to 2021.
  • Lower rates and ready access to capital would imply companies use more debt, hold less cash, invest more, and return less cash to shareholders.
  • While these low rates encouraged plenty of undisciplined behavior among investors and companies, the large U.S. public companies behaved in ways that were not consistent with what theory would suggest.
  • We emphasize how companies often use hurdle rates much higher than their cost of capital and that buybacks will contribute less to earnings per share growth than they did in the period of easy money given today’s valuation multiples and interest rates.
 
Article Team Image
 
Counterpoint Global’s culture fosters collaboration, creativity, continued development, and differentiated thinking.
 
 

Subscribe to Counterpoint Global Insights - Consilient Observer

Please enter the code sent to your email address.

Valid for 10 minutes only

Confirm
Email Not Sent
 
 
Submit
 
 
 
 
 

IMPORTANT INFORMATION

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) and its subsidiaries and affiliates (collectively the Firm”), and may not be reflected in all the strategies and products that the Firm offers.

This material is for the benefit of persons whom the Firm reasonably believes it is permitted to communicate to and should not be forwarded to any other person without the consent of the Firm. It is not addressed to any other person and may not be used by them for any purpose whatsoever. It is the responsibility of every person reading this material to fully observe the laws of any relevant country, including obtaining any governmental or other consent which may be required or observing any other formality which needs to be observed in that country.

This material is a general communication, which is not impartial, is for informational and educational purposes only, not a recommendation to purchase or sell specific securities, or to adopt any particular investment strategy. Information does not address financial objectives, situation or specific needs of individual investors.

Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal.

For the complete content and important disclosures, refer to the article pdf.

 

Dieses Dokument ist ein Marketingdokument.

Nutzer müssen die Nutzungsbedingungen lesen und akzeptieren, da in diesen bestimmte gesetzliche und regulatorische Auflagen enthalten sind, die für die Verbreitung von Informationen zu den Anlageprodukten von Morgan Stanley Investment Management gelten.

Die auf dieser Website beschriebenen Dienstleistungen sind unter Umständen nicht in allen Rechtsgebieten oder für alle Kunden verfügbar. Weitere Einzelheiten können aus unseren Nutzungsbedingungen entnommen werden.


Datenschutz    •    Nutzungsbedingungen

©  Morgan Stanley. Alle Rechte vorbehalten.