No, it’s not a bank panic. It’s what comes after…
Between Mar. 10-16, Bank of America asked 212 fund managers what they thought was the biggest market risk (BBG). The results:
- 31% say a credit crunch is the biggest market threat.
- 25% say inflation is the biggest threat.
A credit crunch is a scenario where loans become more expensive and harder to get.
Why that’s bad: “Credit is the mother’s milk of economic activity” — per Moody’s Analytics Chief Economist (CNBC). MM — the heart of the boys and the economy.
Businesses rely on credit to grow, and consumers need it to finance big purchases (i.e., homes and cars).
- The recent events in the banking sector could lead to a credit crunch — which would slow the economy.
- Banks will likely slow the pace of lending and prioritize strengthening their cash balances.
“The economy is heading for recession and the credit crunch has accelerated the pace,” — per the Chief Economist of TS Lombard (MW).
