Things are about to get real for corporates with a steep maturity wall. Even for larger companies which termed out their debt in 2020 and 2021, bloated cash balances are dwindling.

During the first half, cash spending on capex, R&D, dividends and cash M&A grew double-digits, according to Goldman’s David Kostin, a notable statistic given that earnings growth was negative during both Q1 and Q2. The explanation: Management had plenty of cash on hand, and funded spending with those balances, avoiding the need to borrow at higher rates.

This is ad nauseam: The biggest, richest companies were insulated from the rising cost of debt, and that meant that both spending and margins were resilient despite the most aggressively hawkish monetary policy in a generation.

But, as Kostin noted in his latest, “the aggregate S&P 500 cash/assets ratio has declined during the past two years and now ranks in the 13%ile relative to the last 10 years and in the 9%ile for the typical stock.”

The figure suggests companies still hold far more cash relative to assets than they once did, but the steep increase seen in the immediate aftermath of the pandemic has now fully reversed and it’s no secret why: Management teams, loath to take on more expensive debt, simply ran down their cash instead. As for the disparity between the median stock and the index, I’ll let discerning readers explain that to themselves.

What does this mean looking ahead? Well, it means a slower overall pace of cash use. There’s less cash to burn, and the cost of borrowing more is now sharply higher. Spending will accordingly be more constrained.

On Goldman’s estimates, capex and R&D spend will grow just 4% and 7%, respectively, in 2024, down from 7% and 12% in 2023 and 21% and 14% in 2022. Buybacks, meanwhile, will grow 4% next year, the bank reckons, after falling 15% this year.

“This sequential deceleration reflects the slowdown in GDP growth and the drag from a more challenging financing environment,” Kostin said, of slower capex and R&D expenditure growth. Note that dividend growth is seen mostly steady at 4%, down from 5% in 2023, 9% in 2022 and 5% in 2021. Dividends even grew during 2020. Generally speaking, management would rather cut off its own foot than cut the dividend. Dividend cuts can be a death sentence for the stock.

Do note: The trajectory of buybacks is uncertain. As Kostin put it, “buybacks are one of the most volatile uses of cash.” If the economy turns south, earnings growth doesn’t inflect, long-end yields stay elevated and the Fed’s constrained in its capacity to cut rates by sticky core inflation (so, a stagflationary worst-case) you can toss out your buyback forecasts.

The figure below is instructive. In August, market participants assumed that some of the increase in real rates was simply a reflection of a better growth outlook. As long as it’s possible to explain higher reals (and an increase in market proxies for the neutral rate) by reference to improving growth expectations, equities can stay supported and cyclically-sensitive names can hold up. By mid-September, it was readily apparent there was something else behind the rates selloff and investors reacted accordingly.

“In contrast with the rise in yields earlier in the summer, the latest leg higher in yields has been driven by factors beyond just improving growth expectations,” Kostin said. “Investors have rotated away from stocks perceived to be vulnerable to the higher rate backdrop, including those with levered balance sheets.”

He went on to reiterate a few familiar statistics. Around a third of debt on Russell 2000 firms’ balance sheets is floating rate. That figure for S&P 500 companies is just 6%. Net debt to EBITDA for small-caps is 2.9x. It’s 1.7x for the S&P.

“The strain of higher rates is even more acute for small, private businesses,” Kostin remarked, noting that according to Goldman’s estimates, around 50% of small business debt is either credit lines, short-term loans or other floating-rate debt.

Coming full circle, it’s still the case that the largest companies with the best balance sheets have some runway before higher rates start to really bite. But if Jerome Powell’s “candid” remarks from October 19 were any indication, no company (or household) is completely safe. Absent an economic calamity, rates aren’t going back to pre-pandemic levels. And the “short” in “short-term neutral” could end up being a misnomer. Just ask the 2026 dot.

So, you know, “never send to know for whom the bell tolls.”