The Global Economy Is Well Oiled

In all the talk we have seen lately about an allegedly weak global economy, there is a common thread: It largely focuses on lagging indicators. What already happened. Oddly, few seem to be looking at inputs to future growth. Among the biggest and most essential: credit, the lifeblood of the economy. On that score, supply is flowing liberally to households and businesses eager to spend and invest, greasing the gears of commerce globally. This bodes well for stocks worldwide.

Largely overlooked amid the current uproar we see in financial news (AI disruption, war/geopolitical risks, trade uncertainty, etc.): Loan growth is accelerating across the developed world. As Exhibits 1 and 2 show, banks in the US, UK, eurozone and Japan are lending at their fastest rates in a few years. Whether to households or businesses, the pickup in loan issuance belies widespread worries they are retrenching. Sentiment may seem sour, but credit trends suggest a lot of room for positive surprise.

Exhibit 1: Total Lending Is Picking Up Worldwide

Source: Federal Reserve Bank of St. Louis, Bank of England, European Central Bank and FactSet, as of 3/3/2026.

Exhibit 2: Business Lending Is Picking Up Worldwide

Source: Macrobond, as of 3/3/2026. Commercial & Industrial loan growth, January 2023 – January 2026. US C&I loan growth adjusted to remove one-time effects from Federal Reserve loan category reclassifications.

Banks appear more than willing to keep the spigots open to supply borrowers. As Exhibit 3 shows, developed world yield curves are upward sloping—long-term interest rates are comfortably above those for short-term maturities. Because banks fund loans at the short end and lend at the long, these steep yield curves mean new credit they extend likely earns them more profit. That is a strong incentive for banks to lend. As such, loan growth looks likely to continue for the foreseeable future. Based on American and European Q1 bank surveys, both demand for commercial loans and banks’ willingness to supply them are improving.

Exhibit 3: Selected Global Yield Curves

Source: FactSet, as of 3/3/2026.

Of course, lending isn’t the only way businesses get funding, especially in America. Happily, US corporate bond issuance is also strong. In January, investment-grade borrowing hit $208.4 billion, 12% higher than a year ago, and only the sixth time in history the monthly level exceeded $200 billion.^[i] That was with credit spreads—a measure of default risk—the tightest they have been this century. Investment-grade borrowers are having no trouble finding financing and bond markets—among the most sensitive to potential trouble—show few signs of it.

Nor is this just a US phenomenon. Global bond issuance surpassed $1 trillion this year at record pace, with euro-denominated offerings particularly active.^[ii] All the funding provides further fuel for their future endeavors—and earnings. Companies don’t just borrow for no reason. It funds investment and growth, which they wouldn’t undertake if they didn’t view it as profitable.

It isn’t hard to see why this supports stocks. Markets are forward-looking and faster lending suggests burgeoning economic activity. Quicker loan growth is particularly noteworthy in Europe, where businesses rely more on bank financing than in America. European economic sentiment remains stuck in neutral. Yet faster lending has helped manufacturing purchasing managers’ indexes there recently flip back above 50—signaling expansion—alongside their dominant services sectors.

Around the world, credit markets are humming. That highlights how, looking ahead, growth likely extends, which undercuts so many worries we see swirling endlessly through the press. And with reality set to continue overtaking expectations, we remain bullish.