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In a research note to clients, UBS Strategist Stephen Caprio argues that investor confidence — evidenced by high stock market valuations — may may be misplaced, given a recent slowdown in bank lending.

Expand chart
Data: U.S. Federal Reserve Board; Chart: Andrew Witherspoon / Axios

U.S. bank loan growth by domestic banks is falling in nearly almost category, most especially "commercial and industrial" loans. Caprio points out that this decline is not being made up by higher growth in corporate bond issuance, and is being driven mostly by a lack of demand for borrowing.

Why it matters: Companies are issuing less debt due to a mix of uncertainty regarding tax and spending policy, already high debt levels in the U.S. corporate sector, and the threat of higher interest rates. Investors are counting on stronger global growth to help U.S. companies overcome these headwinds, but they may be discounting the chances that some sort of shock — like the 2014 oil price collapse — constrains growth and triggers a stock market pullback or correction.

Go deeper

Justice Department drops insider trading inquiry against Sen. Richard Burr

Sen. Richard Burr (R-N.C.) walking through the Senate Subway in the U.S. Capitol in December 2020. Photo: Stefani Reynolds/Getty Images

The Department of Justice told Sen. Richard Burr (R-N.C.) on Tuesday that it will not move forward with insider trading charges against him.

Why it matters: The decision, first reported by the New York Times, effectively ends the DOJ's investigation into the senator's stock sell-off that occurred after multiple lawmakers were briefed about the coronavirus' potential economic toll. Burr subsequently stepped down as chair of the Senate Intelligence Committee.

Netflix tops 200 million global subscribers

Illustration: Rebecca Zisser/Axios

Netflix said that it added another 8.5 million global subscribers last quarter, bringing its total number of paid subscribers globally to more than 200 million.

The big picture: Positive fourth-quarter results show Netflix's resiliency, despite increased competition and pandemic-related production headwinds.

Janet Yellen plays down debt, tax hike concerns in confirmation hearing

Treasury Secretary nominee Janet Yellen at an event in December. Photo: Alex Wong via Getty Images

Janet Yellen, Biden's pick to lead the Treasury Department, pushed back against two key concerns from Republican senators at her confirmation hearing on Tuesday: the country's debt and the incoming administration's plans to eventually raise taxes.

Driving the news: Yellen — who's expected to win confirmation — said spending big now will prevent the U.S. from having to dig out of a deeper hole later. She also said the Biden administration's priority right now is coronavirus relief, not raising taxes.