1 Industry To Watch As Consumer Debt Rises
Over the past year, a growing number of Americans have racked up enormous amounts of credit card debt as they struggle to keep up with the rise in consumer prices. A new report from CreditCards.com shows that 60% of credit card holders have been carrying balances on their card for at least a year – a marked increase from 2021, when that rate was at just 10%.
In August CPI increased as oil prices decreased, suggesting higher prices are stickier than previously thought. Since energy prices are a major factor in calculating CPI, one would expect the figure to decline as energy prices pullback. However, this has not been the case.
Thus, as prices continue to skyrocket, more American consumers are turning to credit in an attempt to disperse some of these costs. Americans owed a stunning $887 billion in credit card debt as of June 2022, according to recent data from the Federal Reserve Bank of New York. That was an increase of about 5.5% from the first quarter of the year, and a 13% increase from the year-ago period.
This could very well be a bad omen for the state of the economy, however, there are those who stand to benefit from a trend like this.
As credit card balances rise at the same time interest rates climb, credit card companies should see a bump in revenues due to these factors working in tandem.
Bad news for consumers, but good news for investors who are paying attention to the trend. The more debt that is taken out by consumers, the more that needs to be paid back, plus interest. Unfortunately, no matter how bad things get, these balances will need to be paid.
For investors, this could present an opportunity. It may seem cold to look at this developing trend as an opportunity, but these are the exact decisions that can better prepare ourselves for just such an occasion. Making better financial decisions, like investing over wasteful spending, is exactly what sets people apart from the average American.
If you’re reading this newsletter, chances are you are looking for ways to improve your financial future. Here’s two ways; eliminate any wasteful spending and instead, invest whatever you would’ve otherwise used to buy something you didn’t really need at a time you definitely didn’t need it.
Call this the two birds one stone strategy. The ominous stat above can keep us from racking up unneeded credit card debt. Moreover, we can take that cash and find a place for us to put it to good use over the long-term.
With all this in mind, I added three new stocks to my watchlist, and with the market’s recent sell-off, their valuations look a whole lot better.
Spotting trends as they develop and having faith in a long-term strategy are how investors can use times like these to get ahead. There may be more ‘pain’ as Fed Chair Jerome Powell predicted, but to stop investing now would be tantamount to betting against the recovery of the strongest economies ever. Not a bet I’m willing to make.
Instead of maxing out your credit cards, use this time to max out your investments. Where one spending habit can dig your financial grave, the other offers your portfolio and financial future, new life.