Investment Advisor Blog | Signs Of Topping In The Consumer Credit Cycle | Talkmarkets - Page 3

Signs Of Topping In The Consumer Credit Cycle

Date: Thursday, January 24, 2019 1:28 PM EDT

“Ms. Hering, who is 30 years old, received a loan at a rate of just over 6% for the first five years; it adjusts after that.”

Do these stories mean that the economy is about to collapse a la 2008? Of course not. All it means is that the business cycle is alive and well and that consumer lending has reached the point where prime borrowers have reached a level of debt they are happy with and lenders are now stretching a bit to grow. This happens every cycle, frankly. What it tells me is that delinquency rates are probably troughing out and overall credit quality and lender returns are probably peaking.

While these are important tidbits to consider when valuing financial services companies on multiples of book value or normalized return on equity, it is probably not going to help pinpoint the next recession. Leave that job to the economist community that has correctly called ten of the last five recessions, or the Federal Reserve, which has never (and will never) predicted one at all.

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Moon Kil Woong 2 years ago Contributor's comment

The economy and stock market look fine for another year or so right now after overcoming a rough patch with tariff, shutdown, rising inflation, Federal Reserve tightening, and slowing growth intrigue. Hopefully, this next year will be calmer.

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