A Grim Warning For All Investors

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THE US CREDIT DOWNGRADE:
On August 1st, the credit agency ‘Fitch’ downgraded the US in terms of the future outlook, going from what’s called a ‘AAA’ rating – to ‘AA+’ – and, once that happened, the market immediately began selling off. As they say, “This reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance” compared with other countries with similar debt ratings”

CREDIT CARD BALANCES RISE ABOVE $1 TRILLION:
Even though $1 Trillion dollars is a LOT of money, there’s one aspect that’s often overlooked – and that would be: Delinquency Rates. This tells us how many people are not paying their credit cards – and, if we look at what percentage that is today, it’s actually near the lowest we’ve seen since 1990.

Second, when you look at the debt – as a percentage of disposable income – meaning, how much someone makes – versus, how much they spend – we’re at some of the lowest levels, in decades, by a fairly wide margin.

And finally, in 2018, Credit Card Debt closed the year at $870 billion – although, when you adjust those in today’s numbers, that would be the equivalent of $1.01 trillion, which means it’s pretty much unchanged over the last 5 years.

MOODY’S BANK DOWNGRADE:
On Tuesday, August 8th – Moody’s issued a downgrade, signaling 10 banks that they believe were at risk – including M&T Bank, Pinnacle Financial, BOK Financial, and Webster Financial. On top of that, they also issued a “potential review” of several larger banks, like BNY Mellon, Northern Trust, State Street, and US Bank. As CNBC says, “banks have been forced to pay customers MORE for deposits, at a pace that outstrips growth in what they earn from loans.”

STOCK MARKET EARNINGS:
In June, investors expected that earnings would fall 7% during the second quarter – but, instead profits only dropped by only 5.2% – and, on average, they topped expectations by 7.2%. Now, yes – this does mean that “Revenue is down the most since 2020,” but that’s partially because revenue was so high during the pandemic – so, any decline today, by percentage, is going to look more exaggerated than it would, otherwise.

Let me know your thoughts in the comment section! Especially if you’re actually reading this. I try to spend some extra time writing these up…there has to be a few of you actually here right now 🙂

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