It may be true that recent banking troubles were unique in nature and therefore unlikely to upset the stability of the financial system. However, the event of two bankruptcies has produced enough stress in the banking industry to pull back lending. Consequently, the economy will face headwinds in obtaining credit, which will weigh on business activity. In fact, the money supply is already falling, reducing banks’ balance sheets and, in turn, their capacity to lend money. I agree with Blackrock’s chief investment officer that the fallout from recent banking turmoil, the blow off of froth in the labour market and a series of action-packed economic prints are painting a slower rate of inflation. In this connection, the S&P 500 rose 125 points in the week ended April 14, up 8.5% from the March 13 intra-low at 3809 – the thin green line of support – heading toward 4300 – the thin red line of resistance.
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By Hubert Marleau
By Hubert Marleau
