Loan growth returns after 17 week contraction!

SPECIAL UPDATE: LENDING TURNS POSITIVE FOR THE FIRST TIME IN 17 WEEKS!

Although the first six statement days of the month of November continue to show a gross surplus (this is the longest stretch of surplus since I started writing my Fiscal Trend Digest report and collecting the data going back to May), the stock market continues to rally.

Surpluses constitute fiscal drag so, ordinarily, it would be bearish at some point for stocks and the economy all else being equal.

However, households spending out of savings or, an uptick in lending (private sector money creation) can also work to sustain consumption and output.

Until now there has been NO evidence of loan growth, in fact, total loans and leases (reported weekly by the Fed) have been contracting for the past 17 weeks.

IN THE MOST RECENT DATA WE NOW SEE THE FIRST UPTICK IN LOAN CREATION. THIS IS A POSITIVE SIGN. (Please see graphic below.)

IT SUPPORTS MY VIEW THAT THE NEXT PHASE OF THIS STOCK MARKET RALLY AND ECONOMIC RECOVERY WILL BE LED BY THE PRIVATE SECTOR UNTIL FISCAL DRAG BECOMES HIGH ENOUGH TO HALT THE GROWTH CYCLE. HOWEVER, THIS PHASE SHOULD BE THE MOST DYNAMIC ON THE UPSIDE! COVER ALL SHORTS AND LOOK TO BE LONG AS THIS TREND UNFOLDS!