Consumer Credit Surges

Market Overview
Read time 0.8 minutes

Year To Date Performances:

1. In June, total consumer credit surged to $17.8 billion, nearly doubling the increase seen in the previous month. This included the first reduction in revolving credit since April 2020, a period marked by the initial impact of the pandemic. Non-revolving credit, encompassing student and auto loans, showed a substantial rise of $18.5 billion, while there was an unexpected decline of $605 million in revolving credit, which includes credit card debt. This trend indicates that consumers might be opting to reduce spending in favour of debt repayment, particularly significant given the current record-high average credit card interest rate of 22%.

2. Last week, hedge funds escalated their short positions on long-dated Treasuries to levels unseen since 2010. In contrast, asset managers also increased their positions to a historic high, but predominantly on the short side. The looming query is whether the trajectory of rising yields, akin to the aftermath of Bank of Japan policy shifts and the US credit rating downgrade by Fitch, aligns with the predictions of hedge funds. Conversely, will concerns about a potential economic slowdown force rates to decline, resulting in a win for asset managers? Shifting to a different topic, traders have amplified their bullish bets on gasoline to levels akin to those witnessed during Russia's invasion of Ukraine. This uptick in positioning coincides with the onset of the US summer driving season, a period often marked by elevated gas prices and is concurrent with heightened concerns over potential disruptions in producer/refiner operations due to the increasing likelihood of hurricane-related impacts.

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4. Headlines

   1. Recent research from the San Francisco Federal Reserve indicates a notable deceleration in shelter inflation.

   2. Palantir Technologies is expecting that it could be eligible to be included in the S&P 500 after it reports its Q3 2023 earnings.

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