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Tackle Today: Consumers are in Tip-Top Shape

July 23, 2021

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Bet Against Them at Your Peril


We are a consumer-driven economy. When mom and pop are flush with cash, they spend. The spending drives corporate profits and, ultimately, stock prices higher. There are countless methods for measuring how healthy consumers’ balance sheets are. How they’re doing paying bills and other debts is a great one.

Today’s chart shows the delinquency rates for auto loans, credit cards, mortgages, and other unsecured debt. Note how all fell to new lows in May. This is a good thing! Delinquencies only rise when people are unemployed and cash-strapped. It’s not like people avoid paying their bills because they want to. They do so because they have to. This is yet another sign of the economic recovery after last year’s recession.

Does it bode well for the stock market? Sure. But remember what we said yesterday during the NBER recession message. Price leads economic indicators, not the other way around. So the more accurate way to think about what’s transpired is that the stock market’s performance over the past year bodes well for consumers and the economy. As is often the case, the market discounted and priced in these healthy metrics ahead of time.

Chalk this up as another in a long line of victories for the forecasting prowess of asset prices.


Chart of the Day

Consumers’ Credit Metrics

The descent in delinquency rates across a broad spectrum of debt provides an enlightening view of consumers’ improving financial position.   

Video of the day

Jedi Options

Coach Tyler analyzes a Bull Call Diagonal Spread on KeyCorp $KEYi after a strong earnings report on Tuesday n this clip from Wednesday’s Halftime Report

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