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Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here. |
There are no secrets here; yield curve inversions are about the most reliable predictors of recessions. After a protracted period of inversion, the steepening phase is when a recession hits the real economy. The Fed has tried its level best to engineer a landing of some sort, soft, hard, gravel, water landing perhaps. If commercial bank lending is anything to go by, we are coming in hot.
Analyzing bank lending reveals a significant drop in commercial & industrial loans by $70bn since its peak in February. Once robust at 15.4% in November 2022, year-on-year growth has dwindled to 0.2% by September 13. Such downturns in loans typically foreshadow recessions. In addition, consumer auto loans have contracted notably, with recent YoY growth at -2.2%. While there are ongoing concerns about commercial real estate lending, especially in the office sector, banks remain active at a much slower pace. The year-on-year growth for this segment decreased to 7.2% in September. Banks are not lending less because they run out of money or because of Basel III regulations. No, it’s because of elevated counterparty risk!
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Learn more about the Market Situation Report written by Tier 1 Alpha. |
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