In the past few days there was news of Chinese banks restructuring bonds and tightening mortgage criteria to slow lending. US banks are also piling into ultra safe bonds and curbing lending throughout the year. Brexit has fractured loan availability across European countries, especially in Italy, including Germany.
Markets have not seemed to care, with market up from the years lows and only about 5% off the highs of the year. This should worry investors that in the medium term the lack of lending due to poor prospects could become self reinforcing and bring about the decline in economic numbers lenders are anticipating.
US election worries are front and center in the news, but after the election and the immediate smoke clears, markets will have to face year end and 2017 prospects. This is to include a rate hike that is still seen as more likely than not to be in December. The dollar has been rallying in light of that which is supposed to be a negative for the markets, but correlations have broken down throughout the past few weeks. the bond market is seeing yields spike from their summer lows on safe bonds, and even TIPS are getting a lot of attention. Market signals are looking like a rate hike is expected, while inflation will rise, and the economy continues to grow. All the while banks continue to buy more bonds and lend less. Hopefully the banks are waiting on the side lines for higher rates to start lending, but if they keep their purses tight, the economy will struggle to find the capital to keep its growth going.