Chart of the Week and Weekly Report Highlights
This week: Global PMI & Policy Pulse, Gold price outlook, Defensive Value stocks, Copper, USDCNY, Private Equity, Credit spreads and IG Credit.
This email provides a look at what we covered in the latest Weekly Insights report
The Weekly Insights Report is part of our entry-level service: presenting some of the key findings from our institutional research service.
Chart of the Week - Banks Taking a Cautious Approach
Credit Spreads vs Lending Standards: The latest Fed loan officer survey (which asks banks whether they are making it easier/harder for people to get a loan), showed banks taking a slightly more cautious stance towards commercial and industrial lending standards. To be fair, it is still only about neutral, so on balance no change in lending standards, but it does mark a distinct change in trajectory.
We pay attention to changes in bank lending standards because it reflects changing economic and market conditions, but also gives a tell on the availability of credit. And as such, we can also draw insights from the data in terms of the outlook for markets.
A tightening of lending standards (or a shift in trajectory towards tightening) can be a harbinger of tough times ahead. We see this distinctly and clearly in credit spreads (which in some ways is a measure of credit availability in the capital markets). The latest move in lending standards points to upside risk for credit spreads. This would be entirely consistent with Fed tightening, and the deteriorating macro outlook.
Key point: Shifts in bank lending standards point to upside risk for credit spreads.
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Other topics covered in the latest Weekly Insights Report:
Global PMI & Policy Pulse: unfriendly outlook on multiple fronts.
Gold: facing multiple macro headwinds, bearish technicals.
Defensive Value: reviewing the value/sentiment/positioning case.
Copper Positioning: big drop in copper futures positioning.
IG Credit: the drawdown in IG credit is on par with 2008.
Credit Spreads: contained for now, but risks loom.
Fed Catch-Up Risk: from risk to reality, the charts show the transition.
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Thanks for your interest. Feedback and thoughts welcome.
Sincerely,
Callum Thomas
Head of Research and Founder at Topdown Charts
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