Credit-Card Debt Stabilizes
Outstanding credit-card debt of U.S. consumers peaked at just over $1 trillion before the financial crisis and recession in 2008. This tremendous growth in loans occurred over the previous two decades. Following 2008, credit-card debt dropped precipitously; about 20% since the peak, through a combination of charge-offs and increased payment rates. In spite of credit-card debt appearing stable in recent months along with a steadily improving economy, lenders are still cautious about growth prospects. Mortgage debt has also declined since the recession, but many young borrowers don’t benefit from that since they are not yet homeowners. Contrary to declining credit cards, student loans have surged as young people struggle to pay the rising cost of education. Through the first quarter of 2013, student loan debt rose at a record pace. The great recession brought revived the notion of less debt. As a result, many consumers are turning away from credit cards and turning towards prepaid debit cards as a way to manage their spending. Companies like American Express, Chase and other traditional credit-card lenders have introduced new prepaid cards in recent months and look to gain from this new and rising trend that is likely here to stay.
Markets Suggesting Economic Improvement?
Sell In May? Maybe, but let’s wait a while before we get too trigger happy. At various stages, since March 2009, the bull market has relied on fiscal stimulus (first-time homebuyers credit, Cash for Clunkers and Obama’s 2.00% cut in the payroll tax) or on monetary stimulus (multiple rounds of Bernanke’s QE). At present, major indices are responding to signs of an accelerating private sector. Given the unambiguous strength in the private economy, it would seem that further gains are imminent with no impediments on the horizon.
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