During our Market Pulse webinars, our audience submit questions each month to our expert panel. For our June Market Pulse webinar our panel included, Dr. Robert Westcott, President and Founder of Keybridge; Chris Wheat, President of JPMorganChase Institute and Tom O'Neill, Risk Advisor at Equifax. Below are their answers on consumer credit trends, delinquency rates and more. 

Q: [The Consumer Credit Trends data] showed the delinquency rates improving month-to-month. Is this more than just typical seasonality?

Tom O’Neill: The short answer is, we can't obviously rule seasonality out; it’s definitely having an impact. One example I’ve used is of people getting tax refunds and using that to retire some debt. But it seems to go deeper than that. When we look at what delinquency rates were doing last year, those are still going up. It was ignoring the seasonality that we historically see when we're going through periods of normalcy. The fact that we are seeing more normal patterns in terms of delinquency rates across different channels seems to indicate that there is something more than seasonality going on there. There is a plateauing. We have been seeing this for several months now in some channels, and in some cases, a decrease in delinquency. How much of that is actual, fundamental improvement in terms of people's ability to make their payments, and how much of that is seasonally impacted. We'll need to see that fleshed out over the months ahead.

Q: The [investment] trends [data shown by Chris Wheat] seem related to interest in investment apps like Acorns and Robinhood, yes?

Chris Wheat: That’s a good framing. I might just broaden it beyond the apps. The cost of retail investing overall has gone down in a fairly significant way, platform independent. Some of the activity, I think, is people having more money to invest. But during some of that increasing time, that’s when people had a relative liquidity to do things with. Some of the other interesting dynamics that we've seen have to do with income. For example, if you had recent income, you're more likely to see either recent or long term growth in your income. You're more likely in those months and periods to push money into an investing account. So it's not just about the lower cost of investing. I think that there's something changing about that. People are responding to the opportunity to invest as well.

Q: When do you feel that the Fed will cut rates? How many times this year?

Rob Wescott: The futures markets are now saying that the Fed will not cut rates this summer when they meet in late July, but that they will cut rates in September. It's a 61% chance of a rate cut then and one to two rate cuts for the rest of the year. That's kind of the conventional wisdom. Now we're in the financial markets. Before I saw the employment report for May, the CPI report showed 0.0% change of CPI for May. I thought that we would not get a rate cut even in September. But those two developments have changed my thinking. The minus 408,000 jobs on the household survey in May and the 0.0 on CPI, show a little bit more weakness and a little bit more moderation and growth. I'm on board for a September rate cut, and I actually could see another one in November and December. The Fed meets the day after the election. So if the Fed meeting was the day before the Presidential election, they would not vote as that would be seen as too invasive into the election process. But if it's the day after the election, and they feel like they want to cut rates. I think that they would. So I could see two rate cuts. One rate cut in September and one after the election. 

Q: Back to the delinquency improvement question, do you have a line of sight on servicers increasing their use of short-term loss mitigation options to manage delinquency?

Tom O’Neill: No, I don't have data in front of me to say, here's how many people, or how many servicers, have increased their account review cadence over the last 12 months, or changed strategies. That certainly has been a growing topic of conversation that we have with our financial clients. There is a growing awareness of the benefits of being able to monitor portfolios on a regular basis, and being able to take earlier actions. What those actions are certainly varies. For example, credit unions will tackle things differently than banks or other financial institutions. But the end result is still the same. It seems there's more interest in terms of seeing what they can do to better understand that potential risk before it comes home to roost on their portfolios. While I don’t have specific numbers on that front, I can tell you that it has been an increasingly frequent topic of conversation.
 

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