Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by Nate Kreinbrink, financial planner at NelsonCorp Wealth Management. Welcome back, Nate.
Nate Kreinbrink:
Thanks again for having me today.
Brandy Auterson-Hurst:
So Nate, as we kick off the year, what signs are you keeping an eye on to see how the economy is doing?
Nate Kreinbrink:
Well, I think one important area that we’re watching is business borrowing. Now, specifically commercial and industrial loans or C&I loans, as this is a key source of capital for companies. Now businesses use these type of loans to fund their operations, invest in growth, manage their cash flow, so it’s a good real-time indicator to the overall health of the economy.
So, I think we’ve got a chart that goes into this a little bit more, and this chart is showing historically the balances of C&I loans dating back to the 1950s. So you can see how it kind of ebbs and flows, but mostly goes up over time with dips usually occurring during economic slowdowns.
Now looking at the far right-hand side of this chart, you can see how those loan balances have kind of surged and then plummeted right after the COVID crisis, but they have since rebounded and stabilized in recent months. So in other words, businesses still have the confidence to borrow the lenders and are still willing to extend credit even in these current economic environment.
Brandy Auterson-Hurst:
Okay, so how should investors think about this when it comes to the economy and markets?
Nate Kreinbrink:
Well, I think the major takeaway from this is that a recession or economic slowdown, which many people feared was coming, isn’t necessarily a major threat at this current time. Now, usually when we see a decline in C&I loans, it’s usually historically been a sign that a recession or economic drawback is close or is currently underway. However, with just this modest growth that we’re seeing, it is a positive sign for the economy and for stocks as we head into the new year.
Brandy Auterson-Hurst:
All right, Nate, as always, thanks for joining us.
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Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.