Displaying items by tag: economy

With U.S. GDP dipping negative in Q1 and tariffs clouding the policy outlook, concerns are mounting over how resilient the American consumer truly is. Rising credit card delinquencies point to financial strain, especially among lower-income, lower-FICO borrowers, while looser post-pandemic underwriting standards and inflation have only added pressure. 

In contrast, higher-income consumers—especially homeowners—have largely weathered the storm, thanks in part to low fixed-rate mortgages and tighter lending practices in recent years. 

This divergence is pushing savvy investors to focus on more defensive segments like asset-backed residential credit and small business loans with strong underwriting. While these may offer slightly lower yields, they come with greater resilience and the potential for long-term stability amid an increasingly bifurcated market. 

Finsum: As credit performance grows more uneven, navigating this environment requires a sharper eye on borrower quality and a flexible, informed investment approach.

After Moody’s downgraded the U.S. credit rating from Aaa to Aa1, investors sold off government bonds, driving long-term Treasury yields sharply higher. This spike in yields raises borrowing costs for consumers and businesses alike, potentially slowing economic growth. 

Analysts warned that higher rates could ripple across mortgages, auto loans, and business financing, putting pressure on spending and investment. While credit downgrades by S&P and Fitch in past years had limited long-term economic impact, the timing of Moody’s move—amid heightened bond market volatility and mounting national debt—has amplified market anxiety. 

Some experts view the downgrade as a long-anticipated but symbolically important warning about unsustainable fiscal trends. Still, markets showed resilience, with equities rebounding by midday and Treasury yields pulling back slightly from their highs.

Finsum: Are equities investors neglecting the proper risk to US debt right now? Investors should keep close tabs on how this evolves

JPMorgan CEO Jamie Dimon cautioned that inflation risks remain elevated and markets are too complacent, despite the recent tariff pause between the U.S. and China. Speaking at JPMorgan’s investor day, he emphasized the potential for stagflation—sluggish growth, high unemployment, and persistent inflation—as more likely than many assume. 

While markets rallied on the news of tariff reductions, Dimon noted that the economic impact of still-high duties has yet to fully hit. 

JPMorgan lowered its recession odds for 2025 to 50%, but warned that unresolved trade tensions could reignite instability. Experts echoed that the current tariff rollback is temporary, and the underlying threat of renewed trade conflict looms. 

Finsum: Dimon’s remarks suggest investors are underestimating long-term risks, particularly if inflationary pressures persist amid constrained economic growth.

Economic data from the first quarter indicates slowing growth alongside rising inflation, raising concerns about stagflation. February’s PCE price index, the Fed’s preferred inflation gauge, showed its highest reading in a year, while inflation-adjusted consumer spending barely increased. 

GDP is now projected to shrink by 0.5% annually, as rising imports ahead of new tariffs weigh on growth. The University of Michigan’s consumer sentiment survey reflects increasing pessimism, with inflation expectations rising and job market concerns deepening. 

Meanwhile, Fed officials acknowledge that upcoming tariffs will likely push inflation higher, constraining their ability to cut interest rates. 

Finsum: With economic uncertainty mounting, Americans are bracing for a difficult year ahead, but they need financial products that can be robust to these risks. 

Energy stocks have outperformed the broader market this year as investors pivot toward companies with strong cash flow and reliable dividends. Despite a slight dip in oil prices, the S&P 500 Energy Select ETF (XLE) has gained nearly 8%, while tech and consumer discretionary stocks have struggled. 

Energy equities appear more resilient to inflation and tariff concerns, with experts noting that U.S. energy exports are less likely to face retaliatory trade measures. Rising natural gas prices, which have surged over 30% in 2025, have further fueled gains for energy companies. 

Some major pipeline firms, like Plains All American and MPLX, have posted double-digit gains year to date. With Brent crude trading above $71 per barrel, analysts anticipate a gradual climb before prices dip later in the year.

Finsum: With rising inflation expectations, energy stocks could be the pathway to avoid the inflation tax or at least offset it in your portfolio.