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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. |
Some charts speak for themselves. What you're viewing highlights the percentage of banks tightening lending standards for large and middle-market corporates. Over half of domestic banks are now enforcing stricter lending rules. We're nearing levels reminiscent of the 1990s and the Dotcom recession, though we're some distance from the peaks of the GFC. Clearly, tighter regulations played a significant role in lending shifts during the GFC.
Today, the tightening indicates a pronounced uptick in counterparty risk. There's always an element of irony in credit access. To gain seamless access, corporates, much like individuals, need to appear as if they don't truly need credit. As we delve into the NFP data, a tight labor market only complicates things. While inflation has reduced, corporate cash flows have followed suit. The tight labor picture and ensuing wage pressures negatively impact business profitability, especially for smaller entities. Those businesses requiring capital for survival are either grappling with elevated capital costs or, as lending standards tighten, find themselves excluded from capital access altogether.
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Learn more about the Market Situation Report written by Tier 1 Alpha. |
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