Lending to consumers has steadily increased since the credit crisis and has continued since the November elections.

consumer loans (2013-2017)

 

 

 

 

 

 

 

 

 

 

 

Lending to companies has stalled since the elections.

commercial loans (2013-2017)

 

 

 

 

 

 

 

 

 

 

 

Yesterday The Fed raised ST interest rates and indicated there are more to come despite the conflicting data about credit expansion.

Smart move?  Yes . . . as there are logical explanations explaining the leveling out of corporate borrowing.

On the corporate side:

  • Companies are waiting on clarity around tax reform as there’s an expectation for less favorable treatment of interest expense.
  • Companies are delaying investment as there’s an expectation for more favorable amortization rules.

On the banking side:

  • Banks are tightening lending standards on concerns about leverage in the corporate sector.  Much of the stock market gains over the past few years was driven by financial engineering – borrowing on the cheap to repurchase stock.