Market 01/09: Consumer debt surges in November 2023

Consumer debt surges in November due to credit card balances

Total credit balances increase further +23.8 billion USD after an upward revision of +5.8 billion USD in October.

• Revolving credit balances surge 19.1 billion USD in November, the highest since March 2022…

• … even though the average interest rate on credit card accounts in Q4 remained unchanged and stayed at a high 22.75% for two consecutive quarters.

• Non-revolving credit, such as large loans: auto purchases and tuition, increases modestly 4.6 billion USD…

• … mainly due to high auto loan interest rates making it difficult for consumers to pay off large debts.

  • Meanwhile, student loan debt is declining for the second consecutive quarter.

According to New York Fed data, the credit delinquency rate also rose in Q3, mainly from millennial groups and those with both auto loans and student loans.

Statements from two Fed officials: “Interest rates may remain at current levels for some more time”

Atlanta Fed President Bostic:

• Expects there will be two 0.25% interest rate cuts by the end of this year (~ -50bps cut).

• Service inflation is progressing slower but job growth rate is slowing down…

  => need to maintain tightening policy because “it’s too early to declare victory”.

Michelle Bowman also agrees: “not yet time to lower interest rates”:

• However, she has also adjusted her view from last November (that rates need to be raised further) to only emphasizing not ready to cut rates.

Federal funds rate from 2022 to present:

2 statements like ‘pouring cold water’ on Wall Street expectations when previously:

• The market forecasted that the interest rate cut could be 150bsp in 2024.

• Even, there is also about 24% chance that the cut could reach 175bsp.

• BlackRock also believes that the risky investment trend will continue in 2024 due to the market's large interest rate cut expectations.

As Viet Hustler previously commented:

…Fed members will continue to issue tough messages in the coming weeks to “cool down” the market from overly excited expectations about rate cuts.

• Related articles: The FED's “clumsiness” and market confidence…

Trade deficit unexpectedly decreases as services surplus increases

According to the Commerce Department, the goods and services trade deficit decreased -2% MoM, down to -63.2 billion USD on Tuesday.

This was achieved due to: Both import and export values decreased -1.9% MoM, of which:

• Exports (reaching 253.70 billion USD) were limited due to reduced shipments of automobiles, industrial materials, and consumer goods.

• Imports (reaching 316.90 billion USD) decreased due to: reduced industrial supplies, consumer goods, and capital equipment.

Revision of employment data in the Household Survey: increased the decline to -753,000 jobs in December

The Household Survey for December 2023 was further revised and continues to decline sharply: from a decline of only -683,000 jobs to a decline of -753,000…

• … continues to break the record for the largest decline since 2013 (excluding the Covid period).

• Last week, the market was stirred when the payroll survey showed +216,000 jobs added in December, far different from the Household Survey's decline figure.

  • Read more about Viet Hustler's labor market assessment: here.

Some other news:

1. Crypto investors await SEC decision on Bitcoin ETF funds:

   • Spot Bitcoin ETFs may be approved on Wednesday and start trading from this Friday.

   • The crypto market has added nearly 600 billion USD in market cap since September 2023, about 60% of total market cap.

     

   • According to Browne, Bitcoin ETF funds may trade with fees up to 8%, compared to other ETFs like BITO (only 0.02%).

   

2. J&J is expected to acquire cancer drug developer Ambrx Biopharma for 2 billion USD.

3. Fund managers have increased short positions on oil - the second largest increase since 2017 - indicating expectations that oil prices will continue to decline in the future.

4. Japanese stocks rose the most in 34 years, (Nikkei225: 33,763.18 | TOPIX: 2413.09) thanks to the recovery of technology companies.

• As Viet Hustler previously predicted about 2024 economic outlook:

  Throughout 3 decades of deflation, “many stocks of Japanese companies have always been priced below fundamental value (undervalued), so if inflation remains high, the revival scenario of the Tokyo stock exchange is entirely possible.”