Today's chart comes from Callum Thomas, Head of Research at Topdowncharts.com, who says that this is probably one of the most important indicators to watch if you are trying to predict a bear market.
Simply put, it shows whether banks are tightening or loosening standards on large and medium firms and, as you can see, "a deterioration in lending standards has historically been a key warning sign for the S&P 500," Callum notes in his recent Weekly Macro Themes report.
We spoke with Callum on today's podcast (see Global Macro Outlook With Callum Thomas for audio) and also went through the latest readings on global PMI data, global trade, and credit conditions to gauge whether risks have increased for the market.
Whether you are looking at bank tightening or other macro data points like global trade, the key message is that the fundamental backdrop for equities still appears favorable.
When it comes to equity allocation, "America is probably looking the worst, but there's still a lot of value in places like emerging markets, Europe, and even, though probably less so, Japan," said Callum on today's FS Insider podcast.
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