Markets Ken Fisher: beware the ‘silent’ credit crunch that could hit Irish stock prices in 2024
Silent credit freeze One of the main stealth risks I see in the market right now is a lurking ‘silent’ credit freeze, potentially from the growth in global loans falling too far below annual inflation rates. This scenario implies contracting credit—a potential driver of a deep recession. In the eurozone, meanwhile, business lending fell slightly last year. Irish bankers tightened standards broadly as business lending slid from 2.9 per cent year-on-year growth in January 2023 to -6.4 per cent in November. That’s not great, and far below Ireland’s 2.7 per cent January inflation rate.
Normally, that might worry me. Shrinking money supply can cause recession. But that decline followed an insanely abnormal Covid-induced explosion in cash deposits and savings. The declines in cash supply are slowing, but I think it is still worth monitoring. Risk of war Whilst many still fear that the ongoing conflicts in Ukraine and the Middle East will hurt stocks, these are actually too long, too widely watched and economically too small to have a real impact. Instead, the tension between China and Taiwan are a bigger threat but these have been discussed to death—and the risk of war there has actually declined.