Record Household Debt, Yet Balance Sheets Are Strong


1. Household Debt Hit New Record High in the 1Q

2. While Total Debt Rose, Balance Sheets Strengthened

3. Fed Minutes Dashed Hopes For Rate Cut This Year


Today we’ll look at new Fed data which showed that US household debt hit a new record high in the first quarter, marking the 19th consecutive quarterly increase in debt held by American families. However, that same report noted that household balance sheets improved over the same period. How can that be, you might ask? I’ll explain as we go along.

Following that discussion, we’ll look at the minutes from the latest Fed Open Market Committee meeting earlier this month. Those minutes clearly indicate the Fed has no plans to cut interest rates this year. This disappointed many who had been hoping for a rate cut before year-end, but not my readers. Twice in April I predicted there would be no rate cut this year.

Finally, I have a challenge for clients and readers who pick their own stocks at the end of today’s E-Letter. It will be interesting to see how many take me up on it!

Household Debt Hit New Record High in the 1Q

The Federal Reserve Bank of New York, in conjunction with Equifax, released their latest quarterly report on trends in household debt last week. Total household debt rose to a new record high of $13.668 trillion in the 1Q, a $124 billion increase from Q4 2018. At $13.668 trillion, the level of outstanding household debt stands 7.83% above the prior cyclical peak of $12.675 trillion seen in Q3 2008.