Wall St Week Ahead Investors lower outlook for consumers as student loans, credit card debts pile up

NEW YORK, Sept 1 (Reuters) – Signs of rising consumer stress are prompting some fund managers to grow more conservative in their outlooks, even as the broad stock market continues to rally.

While unemployment remains near historic lows, the Federal Reserve’s inflation-fighting interest rate hikes are starting to weigh on households.

Consumer confidence fell more than expected in August, while delinquency rates among credit cards issued by smaller banks are the highest on record, according to data from the Apollo Group.

Department store Nordstrom said last week that delinquencies on its store cards are now higher than pre-pandemic levels. Rival Macy’s said it expects late payments to reduce credit-card revenues by 41% from the previous quarter.

Payments on approximately $1.1 trillion of federal student loans will resume in October, potentially setting consumers up for a “payment shock” of $500 or more each month, according to a study by TransUnion.

“The U.S. consumer is on thin ice coming into the final stretch of 2023,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. She is more bullish on bonds and defensive sectors like healthcare ahead of the fourth-quarter holiday shopping season.

The U.S. economy added 187,000 non-farm jobs in August, slightly above expectations, while the unemployment rate rose to 3.8%, the Bureau of Labor Statistics said Friday. The government significantly lowered its previously reported estimates for job growth for June and July.