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Economy , Investing , Interest Rates
     

“Banks are becoming more cautious about lending”

And the implications are bigger than just getting a loan

by Bob Stokes
Updated: November 10, 2022

Robert Prechter's Last Chance to Conquer the Crash discusses the psychological aspect of a deflation:

When the trend of social mood changes from optimism to pessimism, creditors, debtors, investors, producers and consumers all change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending.

Evidence of that developing financially conservative mindset is seen in this chart from our just-published November Global Market Perspective (commentary below):

TighteningCreditStandards

Eurozone stock market indices have declined this year indicating that the trend in social mood is negative. This trend towards ever more caution can be seen in the chart, from the latest Euro Area Bank Lending Survey released by the European Central Bank. It shows that a net 19% of banks are tightening credit standards, up from a neutral zero at the end of last year, meaning that banks are becoming more cautious about lending.

Just know that there's room for many more banks to tighten credit standards.

What does a rising trend in tightening credit standards mean? Let's return to the November Global Market Perspective:

As credit conditions become ever tighter, expect defaults to rise and debt to deflate.

And, speaking of defaults, here are some recent news items:

  • Private lender cuts Canada mortgage business as defaults rise (The Business Times, Oct. 30)
  • Ally Financial Inc. ... saw charge-offs for retail auto loans quadruple in the third quarter. (Bloomberg, Oct. 21)
  • Leveraged Loan Default Volume In The U.S. Has Tripled This Year (Forbes, Oct. 2)

As social mood continues to grow more negative, expect more defaults in various sectors around the world.

Stay on top of these developments with our monthly Global Market Perspective by following the link below.

Historic Elliott Waves “In Progress”

The Elliott wave price patterns of major global stock indexes are sending an epic caveat.

Our just-published November Global Market Perspective analyses and provides forecasts based on these patterns.

For example, here's a snippet about a major European stock index:

The next significant move will... draw prices thousands of points lower.

You also get forecasts for the major U.S. and Asian-Pacific stock indexes -- as well as others in Europe.

Our Global Market Perspective also covers cryptocurrencies, forex, metals, energy, bonds, economies and much more.

Follow the link below and you can have forecasts for 50-plus financial markets on your screen in just a few minutes.

Chinese Investors Are Rushing into Gold. Should You?

The wild card for the global markets remains China. You've heard about its real estate problems; now the yuan is on the rocks. Here's our monthly Global Market Perspective contributor, Mark Galasiewski, with a handy chart and a few under-the-radar highlights from the October issue to give you a unique perspective on the situation.

European Stocks: “Deeper and Deeper”

October is almost here, and so far, "things are quiet" in the markets, says our monthly Global Market Perspective contributor Brian Whitmer. But watch as he lists a few items on his radar as he gives you highlights from the new, October issue.

Another Way to Measure (and Predict) Volatility

Volatility has reigned on Wall Street this month. One way to measure and predict it is by looking at the difference, or "spread," between the "fear index" VIX and junk bonds. Here's our Head of Global Strategy, Murray Gunn, showing you an interesting chart in a preview of our new, October Global Market Perspective.