Equity Insights: Markets are Ripe for a Regime Change in Risk Appetite

Credit fundamentals show that the US consumer is strong, and early signs from surveys point to an improvement in manufacturing. Lean more in our monthly equity report.

US consumers are famously credit-driven. Their underlying resilience was shown in truckloads in the US banks’ results season, well ahead of the macro data, in our view. Spending on cards was up in the high single digits; lending on plastic cards was up in the mid-single digits; and lending to corporates, mainly to the small and middle-market borrowers that are the backbone of the economy, continues to rise in the high single digits. If the S&P/Case-Shiller Index and bank lending growth are to be believed, then even real estate – both residential and commercial – is, at worst, stable. Private surveys of companies conducted by the sell-side point to a recent pickup in industrial conditions, an early sign that consumers may, at last, be having a positive effect on manufacturing, which has been in recession for what seems like forever.

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