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Year-to-Date Returns (as of May 14th, 1 pm, 2025)
- S&P 500: .13%
- Nasdaq Composite: -1.15%
- Dow Jones Industrial Average: -0.83%
- S&P 500 Equally Weighted: .78%
- Russell 2000 (Small Cap Index): -6.3%
- Gold: 18.43%
- Key Economic Data This Week:
- CPI MOM: .2% (vs .3% Expected)
- CPI YoY: 2.3% (vs 1865k Expected)
- Real Avg Hourly Earnings YoY: 1.7% (vs 1.1% Prior)
Delinquencies on the Rise:
Delinquency rates on credit card debt, which has not been serviced in at least three months, have reached the highest level in over 14 years during the first quarter. The rate of credit card debt moving into serious delinquency – defined as not being paid in 90 days – rose to 12.3%, the highest since the first quarter of 2011. This nearly one-percentage-point increase last quarter coincides with the first batch of past-due student loans being reported, leading to a substantial rise in seriously delinquent student loan borrowers.
Data indicates that US consumers remind under significant financial stress due to high interest rates and sluggish wage growth. Millions of American households are experiencing a sharp decline in their credit scores as delinquent student loan debt accumulates. Missed federal student loan payments, which were not reported to credit bureaus between Q2 2020 and Q4 2024 due to pandemic-related forbearance programs, are now appearing on credit reports. Newly released data from the New York Federal Reserve shows that over 8% of student debt was reported 90-plus days delinquent in first quarter.
As of the end of March, 4.3% of outstanding debt was in some stage of delinquency, up from 3.6% at the end of 2024. However, the increase was more pronounced for student loans, particularly among older Americans. The transition to serious delinquency (90-plus days late) for student loans has tied a 10-year-old record for individuals aged 50 and older. Among this group, 11.23%, or roughly one in nine households, is now seriously delinquent on their student loan debt. Americans age 50 and older held $418.5 billion in student loan debt, shared among 9.2 million borrowers. Although the ratios of serious delinquency in younger age groups were lower, they still experienced significant increases, with the average age of a delinquent borrow rising to 40.4.
The Fed’s data indicates that the credit effect for newly delinquent student loan borrowers is considerable. Among the 7.5% who had a relatively high credit score of at least 720 before the delinquency, their scores dropped by an average of177 points. Overall, the Fed found that 2.2 million borrowers saw their credit scores decline by at least 100 points.
Conclusion:
With debt delinquencies rising, interest rates remaining high, and credit scores falling, consumers will continue to face challenges. Consumer spending contributes accounts for approximately 70% to our GDP, if credit tightens, the economy will slow, and earnings will suffer. As noted last week, the market seems to react more to headlines, than to fundamentals, which was evident on Monday when the market rallied on news of suspended tariffs with China. We continue to believe that the market will remain volatile and plan to maintain our defensive stand.
Have a great weekend.
Your OmniStar Investment Team
