During a recent Yahoo Finance Trader Talk segment, experts discussed the potential impact of rising consumer credit on stock markets. While some worry increased spending could trigger a downturn, the strong performance of major credit card companies suggests otherwise. This positive sentiment is reinforced by banks maintaining stable loan loss reserves, indicating confidence in the current quality of consumer credit. Previous reserve increases were quickly reversed when predicted risks failed to materialise.
The discussion also touched upon the corporate bond market. Despite recent volatility, corporate bond yield spreads remain historically low. This suggests investors aren’t overly concerned about default risk, reflecting optimism in corporate earnings and overall financial stability. This confidence further allays fears about the impact of consumer credit on the stock market. The general consensus, despite alarming headlines, is that the current credit environment is stable, supported by both banking practices and bond market behaviour. This stability contributes to a positive outlook for the stock market.