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Market Pulse is a monthly podcast by Equifax, in partnership with Moody’s Analytics. Equifax hosts bring you interviews with industry experts on the latest economic and credit insights that can help drive better business decisions. Whether you’re in financial, mortgage, auto or another service industry, we help make sense of the latest economic conditions that impact you. This podcast series supplements our Market Pulse webinars, which occur on the first Thursday of each month.
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Welcome to the Market
Pulse podcast from Equifax,
where we break down the latest economic
and credit insights to help you navigate
today's business landscape.
Welcome to the Market Pulse
Podcast. I'm your host,
Emmaline Aliff leader
of the Equifax Advisors,
the Equifax advisors aligned
strategy and execution by
translating economic and industry
trends into practical Equifax,
data backed insights and stories.
We equip executives with data-driven
narratives to make clear strategies,
clear strategic and tactical
decisions. In other words,
we don't just study the economy, we
operationalize it for a competitive edge.
And before we kick off,
our economist from Moody's will
provide an update on the macroeconomic
environment.
I'm Justin Begley, an
economist at Moody's Analytics.
June marked the first federal open market
committee meeting for Kevin Walsh As
chairman, the committee left the
Fed funds rate unchanged at 3.5 to
3.75%.
An updated summary of economic projections
show that an improved labor market
and accelerating inflation have taken
rate cuts off the table and pushed
policymakers. Projections for
the Fed funds rate higher.
The prospect of policy tightening
triggered a negative reaction in financial
markets pushing short-term
treasury yields higher.
The median FOMC member now expects
1 25 basis point rate hike to be
appropriate. This year in March,
the median projection was
for a quarter point cut.
The median fed official forecast
puts PCE inflation at the end of 2026
at 3.6%,
up from an expected 2.7%
in the March outlook.
As the fallout from the energy price
shock from the conflict in Iran will take
time to dissipate core PCE,
which excludes food and energy.
According to the median projection is
expected to reach 3.3% in the fourth
quarter of 2026, up from
2.7% in March's SEP.
Meanwhile,
growth projections were modestly revised
downward as the US economy remains
largely resilient even amidst
the global supply shock.
Our June baseline forecast removed the
rate cuts that were previously penciled
in for the end of 2026
and early 2027. Instead,
we assume that that current current
policy holds in the near term to
immediate term tariff inflation has
made its way through to consumers,
and the worst of the energy shocks impact
on headline inflation is expected to
be concentrated in the middle of this
year. Consumers are still spending,
which is good news, even amid
elevated cost of living pressures.
And the labor market is showing more signs
of life than it had previously in the
year and much of last year.
These dynamics have taken any policy
easing off the table for this year,
even as they do pass. However,
the productivity gains from artificial
intelligence will likely lift the neutral
rate by 2028, and absent any other shocks,
diminish the need to ease
monetary policy further.
Welcome to this month's edition
of our Market Pulse podcast.
We're here to talk about the macro
economy and specifically the things that
we've been studying
around Market Pulse Index.
Before we jump into the questions,
we've had a lot of things going
on this summer in our team.
We talk a little bit about the World
Cup, what's been on your minds with us,
some of the latest things that have
been happening in the sports world. Do.
I have to keep that just
to the World Cup or you,
you did say Sports world because sports.
World is fine domain.
If it's broader, then I'll, then I'll
I'll brag on my Washington Nationals,
and by brag I mean that they're
somewhat respectable for a change,
which is for a national span.
That's, that's huge. You know,
not seeing them at the
bottom of the standings is,
is something I'm still getting used to.
But as far as the World
Cup is concerned, you know,
Ireland and Italy didn't make it. So
it's, it's all focused on the US I guess.
Yeah, I watched the Spurs closely,
the Spurs and the Knicks and the NBA
and that was pretty painful to watch.
So I'm, I'm I'm following the World Cup.
Hopefully the US will
will do well, but I'm,
I'm still a little bit pained by the
the performance that the Spurs had.
Yeah, it's, it's been kind
of fun to watch all of the,
the culture from the World Cup to me,
like with I, I enjoyed like the parades,
like the, the Scottish audience
was having. And then, you know,
how they were like chanting at at
other venues and things like that.
It was quite quite fun and
interesting for me. and I,
I did go to the Braves game
recently. I was there on Pride Night,
which was really a fun experience.
I did read about the consumption of beer,
so it would be interesting to
see if if we see any, like,
indicators in our GDP or in our
consumer spending with respect to beer.
I think it sounds like the Scots have Dr
have drank all the beer out of Scotland
and or sorry, out of Boston.
Out of Boston. I think it was Boston.
Yeah. Yeah. Yeah. So that's
should be interesting.
That's quite, quite a feat,
I guess, to, you know,
pivot a little bit back
into the macro environment.
We oftentimes will talk about,
you know like what's happening from a
vibe perspective or data perspective.
Jesse, when we think
about like the, you know,
when we hear in the news that
inflation is sticky and, you know,
top line economic indicators
you appear to be stable and the
quote unquote vibe on the street
feels a little tight. Why are,
you know, traditional lagging
indicators like GDP or other things
potentially missing parts of the
story of the US consumer right now?
Yeah, so I think it's a classic case of
what what everybody's calling the vibe
session.
I think if you think of us really with
the role that we play with business
economists, we know there's kind
of cold hard math behind the vibe.
So when you look at traditional
indicators like GDP,
they're a good source for telling us
maybe where the ship was three to six
months ago.
They're a little bit weaker at exposing
the holes that are currently forming.
When you think of the top 10 or
20% of the economy increases in
their spending is significant because
it's spending and it's being backed by
assets that are booming.
Top line GDP then looks
incredibly stable and healthy,
but for the average you know,
you're seeing that it completely massed
the micro stresses that are happening
across things like grocery checkout
or gas, you know, at the gas pump.
And that's like the other 80% of
the population. And so, you know,
I think it's really indicative like GD
P's telling us that money was spent,
but it doesn't really tell
us how life was financed.
And so I think it's really
a question of then if,
if we're seeing that it was financed
out of rising wages or if, you know,
our households are having to tap
into dwindling savings that's really
different than, you know, just an
average that's kind of, you know, kind,
kind of consistent. And so that's why
I think that that indicator of GDP,
it's a great measure, but it's one
that we kind of have to watch and,
and look at the nuances behind it.
And that's really what we did
when we built Market Pulse Index.
Yeah, Jesse,
you you used an analogy that I think
you probably read from somewhere else,
you know, but I thought it was
extremely clever. Like, if you have a,
an individual whose head's in the oven
and his feet is in the, the freezer,
the average is normal body temperature.
But that doesn't really tell the story
that that's that individual is in.
And I think, you know, to
your your point, you know,
looking at a single macroeconomic number,
whether it's GDP or anything else
that's aggregated or averaged,
it's obviously missing a lot of the
detail of what's actually happening
underneath. Yeah. Thanks.
Tom. Now I got to come up
with another analogy. .
I'm sure, I'm sure you
could come up with one.
I'll come up with something.
Good. One of the things that we,
we oftentimes talk
about is the lag effect.
And when we think about a lag
effect, you know, we see prices rise,
but consumers don't necessarily
change their habits immediately.
And as prices rise, they
may spend, you know, less,
but their cashflow is definitely
potentially impacted by that.
And sometimes delinquencies will, you
know, could be on the rise. Tom, when you,
when you're we're thinking
about like lag effect,
because I know you've studied this
quite a bit, maybe you can comment on,
you know,
how we try to examine things with
through a Market Pulse Index lens that
sure. You know,
capture and understand those
hidden financial stresses
about missing a payment,
for example.
Good or bad, depending on
how you look at it. We've,
we've gone through a huge case study
of this with the impact of inflation
recently where yes,
eventually those stresses
caused by rising prices
become apparent within a credit score
and other measures because, you know,
people start missing payments, you
know, we see balances grow and so forth.
But even before then, when you're
taking a look at the holistic picture,
you see changes in spending,
you see changes in savings,
amounts in overall wealth.
You start to see debt to income shifts as,
as people are relying more on
credit and paying maybe, you know,
minimum balances as
opposed to larger balances.
And all of this is stuff that happens
predictably prior to the things
that really have an impact on credit
scores, like missing payments or, or or,
or other factors. So there's,
when you take a look at that
wider range of financial activity,
you could start to see where the
stresses are building before it actually
becomes manifest in a credit score
or on your lending portfolio.
Thinking about those different ways,
I know there's you have a number
of things that we've, you know,
incorporated that we study
and it brought into our own
macro index. And I, when I'm
looking at that, you know,
things that, you know,
that come to mind like capacity
or assets are, you know,
examples, but when we think about
like what are we looking at,
what have you found to be some of the most
interesting and relevant things that
indicate consumer financial health as it
relates to each other?
Yeah. Especially recently with, with the,
the stresses that we've seen from
rising prices and affordability being a,
a huge obstacle for a growing
portion of the population,
really what it comes down
to overwhelmingly is,
is access to liquid wealth,
you know, savings, you know,
investments that can be drawn
upon, not 401ks that are pretty,
pretty much tucked away, but
things that when prices go up,
when emergencies come around, or even
planned expenses that come in higher than,
than you had originally planned for
being able to draw upon those savings,
those, those assets is huge. And,
we see that very starkly
within the populations.
Those populations that have those assets
that they can draw upon and have been
drawing upon over the last, you know,
couple years they've been thriving,
they've been able to adjust to
the rising prices and even grow
because they're seeing equity
growth and, and their wealth,
you know grow accordingly.
On the flip side,
those populations that don't have
that, that financial safety net,
that ability to go back and draw upon,
you know, resources when, when needed,
they've been struggling and we
see that reflected in the data.
Yeah. Tom, I think you know, when
you were talking about the, like,
the types and breadth of data,
it brings me back to the notion or
idea of a balance sheet. You know,
if you think about the average household,
and you think about does
this person you know,
have they paid their bills in in
the past on, on time? You know,
that's a question I think we're all
really good at answering you know,
in the risk management world
with the data that we have.
But I think with the focus of
Market Pulse Index, it's really,
does this person have that financial
runway to survive the next economic shock?
And I think when you put that into
the context of looking at the consumer
balance sheets, so looking at credit,
looking at income, debt, assets, capacity,
et cetera, I think you get that notion of,
of what the value is really
of a Market Pulse Index.
It's really getting that that specificity,
you know, on a, on a household,
can they survive that next shock. And
that's, that's really what we, you know,
that's what we do. ,
that's our, that's our job.
Thinking about it. There's of course,
things that matter across the,
the different dimensions,
but liquid wealth the ability to
generate income from a cash flow
perspective,
and essentially that allows someone to
be able to cover their payments and have
favorable debt service ratios. Thanks
for putting that into, you know,
some context,
especially when we think about we do talk
about a lot of the various components,
but there are things that, you know,
definitely have a prioritization
in terms of the ability to
you know, things or even move into the,
you know, the term used was thriver Tom,
so, right. And I know that's one of our
segments that we've been referencing.
Right. So kind of, you know,
changing gears a little bit
you know, and I'm going to,
I was kind of latched onto
the analogy that that y'all
were using about the, you know,
the temperature of the oven and
yeah. Feeling just fine. So let's,
let's unpack the kha divergence. I
know that's the words out there often,
and I know that that's one thing that's
that you're often times talking and
thinking about Jesse, when are
we not in a K? Are we in an E?
Are we in a B or are we in
a Yeah, definitely you know,
whatever shape the economy
might necessarily be. But
some of the recent data,
you know,
shows that the national perspective
on Market Pulse Index I think the
report at the end of the year was 61.6.
Maybe you can talk about
where we currently are and
how things are, you know,
sitting from a stability perspective
and specifically what the potential
illusion of the average could be.
Sure. Yeah. So I think we're, I
think we're somewhere in the sixties,
you know mid 60, like 60 point,
you know six maybe is the latest number.
But you bring up a great point. I mean,
I think it implies that there's
stability in the middle class, but,
you know, like Tom had said, you
know, we talk about averages.
We love to joke about the averages
whether we have our head in the,
the oven or not. But I think
the picture really then of like
this macroeconomic stability,
it shows that there's kind of this calm
surface, but there could be, you know,
more volatility behind the base.
And so I think when we look
at that average of being 60,
it's being propped up by
the top end of the k the,
the top arm of the k the one
that we call thrivers, like.
10%.
A 10% popul population.
Exactly. Yeah, exactly.
So those are consumers that
are growing their wealth,
they're pulling the index
upward, but at the same time,
you have this bottom arm of the K and
that's sinking under the weight of this
persistent inflation and
the high debt services,
it's really pulling that index down. So
when you pull equally from both ends,
it's like the middle's not moving,
but in reality, the middle's tearing,
you see this, you know, this divergence.
And so I think relying on that
average right now, it's, you know,
probably a recipe for the suboptimal
business decision, really,
because nobody's actually living in that
average you're either kind of on that
upward trajectory or that,
that downward trajectory. Yeah.
I think that last point you made
is a particularly good one that we,
we rarely touch on, or at
least we touch on less. We,
we talk about how the,
the average doesn't tell the full story,
but I think very closely
related to that is that average
describes less and less of the
actual population. And that's,
that's critical because that's that
average quote unquote population
is where the financial
lending industry has really
focused a lot of attention on, you know,
that middle class that that
average consumer, well,
there's less and less of that average
consumer. There's, there's more going up,
there's more going down, and, you know,
so that average actually describes
less of the population and,
and doesn't describe a growing
portion of the population.
Yeah. What I heard from the one
liner there is we've seen a 1% drop,
if I'm, if I got the overall stats
correct from what Jesse was saying,
61.6 to 60.1, 60.9.
Yeah. 6 61, 6 to 60.9,
I think is the Yeah.
Most recent. Yeah. 1% total drop. Yeah.
So I think that we've seen an expansion
of the bottom ends. And what I'm,
what I'm curious about then when
we think about that, you know,
different angles of divergence and,
and the speed with with which things
can either move down or up or even
even come back down on the upper
ends. Because I think in our,
in our last report you know, we
were showing that the top 10%,
the thrivers grew by over
30%, and the, the middle,
you know, shrunk by 6% over 18 months.
So when we think about that you
know, Tom, I'm curious, like,
do you think we're in a permanent
polarization of American consumer
finances?
Yeah. So is the K permanent
mm-hmm. Or are we,
that's a fascinating question.
It's actually one that's,
that I've been thinking about a
lot, you know, for a while now. And,
and I did a bit of research,
and by a lot of measures,
you can go back all the way back
to the 1970s and say that's,
that's when the American middle class
really reached its zenith. You know,
that was, you know, that that
was where, you know, the,
the middle class was where
the financial strength was.
But starting in the eighties, we started
to see that divergence start happening.
We started to see the growth, you know,
of the both the populations that were
thriving and, and those
that were struggling.
And off and on that's, that's been
a pretty consistent, you know,
pattern really for over 40 years now.
What's been noteworthy in the last
several years, starting with COVID,
is the rate at which that,
that divergence has, has grown.
And that's why this, this structure, this,
this phenomenon that's been happening
for over 40 years now is really
becoming a headline topic
again. So permanent?
I wouldn't say anything is, is permanent,
but we are definitely in a very long term,
you know phenomenon happening here. Yeah.
I'm curious about things that are
a pivoting and shifting about that.
because I know you know,
we oftentimes will think about
like what makes up the thrivers,
what makes up the, the thriver population?
What are some of the things that
potentially changed? So, Jesse,
when I'm looking at that top 10%, the
thrivers, what do you, what do you view,
or what would you share as
protecting them more right.
Now? I would say, if we think of
the, the analogy as protecting,
then maybe I'll use the
analogy of a shield.
And so as we think of
the thriver population
in a high inflation environment,
when you think of income, you know,
income is definitely a shield. Let's
make the analogy, it's made out of wood.
You know, so it's, it's strong, but it
may not be quite as strong as assets.
And so assets are made out of, you
know, some stronger metal, if you will.
So if you only have high income,
I think inflation can still
erode that purchasing power,
and it makes you feel squeezed.
But when you think of
having accumulated assets,
you think of having home equity
or market investments you're,
you're more insulated. You know?
So when you think of the 20 plus
percent growth and the thriver tier,
it's really fundamentally driven by
an asset story. And so as we think of,
you know, those, those, that
population has a lot of home equity.
They have fixed rate mortgages,
they're actually benefiting
as in as rates go up.
You know, you think of the assets that
they have that are fixed income derived.
And so I think, you know,
as the thrivers go to buy groceries
or they pay for insurance,
or they pay for anything else they're,
they're solid in knowing that
they have that net worth.
They have that background, and I think
that changes their consumption habits,
and it changes their behavior much
differently than somebody who doesn't have
that asset or that shield to protect them.
Jesse's on an analogy roll these days.
I know, I know. .
That's it. I'm done. .
You're done. All right.
No more. Can.
I borrow a few until.
Until the next topic comes along.
Yeah. There you go. Yeah. But that's,
I think that's really really helpful,
especially when we look at like the,
the key things that are, we,
we talk about the k but you,
you offered a bit of insight in terms
of how the equity markets have been
flowing and various bifurcation
of even savings rates
that the top end has been able
to accumulate savings and equity
which has really been a key driver there.
Which of course we've talked about this
often, is that, that will oftentimes,
if the stock market's doing well, even
if someone's not accessing it, they'll,
they're more likely to go out to
a nice dinner on Friday night.
Absolutely. Yeah. And that's a big focus
right now, because savings rates are,
you know, historically low, you know,
two, 3%. And that's a concern, obviously,
you know, more, probably more so on
the, the bottom end of the you know,
low to middle income households.
But certainly you know,
it definitely does matter.
Changing gears a little bit,
I want to talk about the generational
divide in the movements that we've
observed there. Now,
I don't know what your what your
new grandchild's generation is,
is going to be, or are they gen
alpha or is it in the next one?
I think we're in gen. Anyone
born now is Gen Alpha, so, okay.
I'll have to look that
up to be sure. Well.
But we do know that
Gen Z is credit active,
and they've been emerging in this space.
In our last report we saw
that Gen Z grew by a massive,
when we talk about that top tier
they grew by 74%. Now, some of that,
of course could be size of
the population or, you know,
other potential things
with respect to a lot of
variability within that group as well.
Maybe you can shed some light on
why we think that the split seems
to be more dramatic into
the haves and haves nots,
and what are some of the things
behind that? Is it their careers?
Is it other things? Like what are, yeah,
what are some of the key drivers behind
that growth that we've observed there?
That.
Is, that is so millennial, millennial
of you to want to talk about Gen Z. So,
but but I do agree. Gen Z is
fascinating because they are,
they are the up and coming
financial generation. I mean,
they're the generation of the future,
not surprisingly. And you're right.
There is a huge degree of
variability within there,
and a lot of that is what you
would expect. Any, anytime that,
that a a new generation
comes of financial age,
you're going to have a wide distribution
of how they're starting those financial
lives. Their incomes are going
to vary widely, you know, the,
the amount of, of of wealth
that they have, you know,
will, will start to grow
rapidly or not grow at all.
And so you'll see a lot of disparity
or variability across generations that
over time, when we look
at previous generations,
those that variability has tended
to shrink. Yeah. And we see
more, you know, confluence
or around the mean.
But but with Gen Z,
they are in a bit of a unique situation.
There is a lot, as you said, you know,
a lot of growth on the top end of,
of that generation as well as on,
on the bottom end, more so
than the other generations.
And some of this is
because some of them are,
are walking into their financial
lives in, in great shape.
Other facets are in play
as well, though, you know,
some of them have access to family wealth.
Some of them have very
different situations at,
at home and, you know, convenient,
you know, safety nets, you know,
that they can draw upon. So, so that's a,
a different factor than we've typically
seen in, in other in other generations.
So it'll be interesting to see how
that plays out over the years ahead.
Yeah, that's really interesting,
especially thinking the, you know,
emerging careers, but also if, you
know, if someone misses a bill, it is,
it is helpful to have you know,
a generational backing of some
kind mm-hmm .
Or at least in a neighborhood
or some kind of community.
Thinking, Tom, about what you were saying
with respect to the Gen Z. You know,
looking at the conference
board data recently,
I noticed that when you looked at
generational breakout of that data,
and it really tracks well
to Market Pulse Index,
but when you look at that
that conference board data,
it really showed that Gen Z
specifically Gen Z and millennials both
had some of the highest
confidence in the economy,
which it just runs counterintuitive
to me to some extent.
But I think as we were talking
about it, it does make sense.
You have that buffer. You, you
have, even to some to some respect,
gen ZI think having a little bit different
fiscal discipline than maybe some of
the other generations, even millennials,
you know, compared to millennials.
So kind of interesting to see that data.
I know, I know it's, it's
popular to, to rag on the,
on the millennials and Gen
Z, but as a firm, gen Xer,
I like looking at the data and,
and telling it as it is. And,
and what I see there actually does
give me a lot of confidence there.
There's a lot of there
are a lot of signs that,
that say that Gen Z as a whole,
obviously individuals are different,
but as a whole, there,
there's a lot of financial soundness
as they approach the beginning of their
financial lives. It's, it's
encouraging on a lot. Now,
I don't envy them the timing of, you
know, they're entering financial lives.
They have not, they have not
chosen a good time, you know, to,
to start careers and, and
start trying to build wealth.
But with what they have
to deal with, they're,
they're as a whole doing pretty well.
In my, in my notes, I have four
more things I want to talk about.
So we can, we can count them down. I,
you know, thinking about that, the,
the younger generation,
we know that there's not they're not the
only generation that is in the market.
And I, I know we, we still have
not forgotten about the Gen Xers,
Tom and I everyone does.
I think I'm gracious that you
classified me as a millennial,
even though you know how
old I am, .
But when we think about the on the
upper end I really liked how you shared
about the, you know,
some of the things we,
you are observing in the data from like
the seventies onward. And that's like,
if you think about who is of age
at the time to the, you know,
boomers and traditionalists
really having, you know,
and we know that they do exhibit, you
know, higher index scores on average,
some of that is accumulated wealth.
How much of that is potentially distorting
the national average when we think
about the other end of the of the, of
the distribution? And now by distortion,
that that doesn't necessarily
mean that others may not catch up,
but we know that, you know,
things have changed over time.
Yeah, absolutely. So I do
think, you know to your point,
we see with boomers and traditionalists,
they have some of the highest Market
Pulse Index values, you know, call it mid,
you know, mid sixties, 64, 65.
And I think when you realize that those
two cohorts specifically hold some of
the vast majority of the
nation's housing equity,
they have large wealth portfolios,
you can see how that's going to
distort the national average.
They're largely immune to mortgage rates
when you think of having houses that
are either owned outright
or fixed on lower rates,
and then they also hold fixed income.
And so you can see that higher
yields are going to going to impact
positively those fixed
income assets that they hold.
I think it really shows that there is
a, you know, is a true impact to the,
you know, to the average overall, and,
and really a skew then
as a result of that,
when you look at the macro
data at total spending
or, you know, at a, at an aggregate
level for financial health,
I think it's skewed then by that older
generation actively spending down those
retirement assets as well. You know,
so sort of depleting those assets.
So I think there is somewhat of a false
narrative then in terms of overall
consumer health, when you
think of, in, in the context,
at least of what we're talking about with
how boomers both accumulate assets and
then how they spend those assets. Yeah.
And I think part of part of that
is something that we would see any
time we have generations getting older,
is you simply have time on your
side and, and the ability to,
to accumulate wealth OO over
time for for a large portion of
them. But I think one of the
fascinating aspects about these particular
generations that we're looking at
is the potential for the,
the wealth transfer that that is starting
to be on everyone's minds. You know,
as we, we look ahead and, and
we start to see, okay, as,
as the boomers and beyond,
you know, continue to age out,
how much of that wealth comes
down to the younger generations,
and what type of impact does that
make that that we haven't seen
before on, on a scale that
we're looking at? So that's,
that's going to be something that'll
be very closely followed in, not,
not the years ahead, even the
months and quarters ahead.
All right, you experts
. What I want to,
what I do then is we, we've been
talking a lot about the macro stuff,
about the trends, about you know, things
that we've been observing in the data.
But to come back to your
analogy perspective you know,
I'm in the Equifax advisors.
I'm not a lender or a retailer,
but imagine that I am
and it, what, you know,
when we think about that Jesse, maybe you
can, you know, weigh in here and then,
you know, I'd love your perspective
too, Tom is I'm going to ask you,
how do I find resilient consumers
in the shrinking middle in particular,
be it, because I, if I think about that,
I tend to have a perspective on
where the top end might be going,
where the bottom end might be
going. Now studying that middle is,
is critically important,
but how do I find them?
Yeah, it's a great question.
It's something we talk a
lot with customers about.
So I think we're in a golden
opportunity right now.
When you think of where lenders
and retailers are right now,
finding that that middle
class is shrinking,
you can't just paint the remaining
middle with a broad brush.
So if you rely solely on, let's
say, traditional credit scores,
you might see a consumer
that's dropped 30 points,
but it's because their credit card,
US utilization ticked up. And,
and that's due to inflation. And
so risk models are going to say no,
but if you look through the lens of
something like Market Pulse Index,
you're going to find that the
consumer has stable verified income,
they have strong employment capacity,
they have significant home equity.
And so that score dip is,
is really, it dipped due to,
you know, a short term
cashflow management issue,
but it's not a structural issue.
And so I think that hidden risk is,
is where the, the sweet spot is.
It's really allowing lenders
and businesses to find that
resilient upward mobile
consumer. And then you know,
and then they take ad advantage of
that pivoting middle, and they safe,
they safely extend that
credit or service to 'em.
And I think that's the key,
is really finding that hidden
risk in that population,
which is what we've really designed
Market Pulse Index to do. And.
I would say even the,
you used the term traditional
metrics Emmaline, when,
when you were talking about that even,
even those traditional metrics
are changing to a degree.
And, and an example that I use
for that is, is simply the,
the usage of time within there.
Traditionally credit scores
take take as an example,
have been point in time, like, what
does Tom O'Neill look like right now?
What is his debt? What is his, you know,
performance? You know, is he, you know,
delinquent on anything? What are, what
are the open lines of credit that he has?
All of, all of those
factors. But Jesse used a,
a great example with, with rising prices,
like I might have be in
exactly the same strength of,
you know, financial in,
in my financial life as I was previously,
but because the items that
I'm buying are more expensive,
my balances are going to be higher.
I'm still paying it off each month.
My fundamental situation has not changed,
but the formula that
model is going to see, oh,
his average balance is now 1200
as opposed to a thousand dollars.
And it'll weigh that according and,
and my score would be impacted.
And it's missing the point of
the fact that, you know, yes, my,
my balances have changed, but I'm
still making those payments, my income,
maybe you has changed. And so that's
where, to Jesse's point, you know,
looking beyond that and seeing these,
these different facets are my savings,
you know, dwindling, am
I, you still able to,
to meet my obligations without
getting myself under financial stress?
That's where the larger
picture comes into view.
So then to continue on that what I'd,
what I'd be interested in thinking
through is, say, for example,
to be reactive or proactive
is probably a thought that
many lenders would have. It's, it's,
what I would be thinking about is what,
what are the activities
I can do proactively?
What are the things I can
do reactively? And when we,
when we think about that,
I love how y'all were talking today
about specifically like economic,
taking an economic metric like inflation.
How does that carry through to
cash flow and then cash flow,
how does that carry through to all the
things that someone would be able to
withstand any modification
to that cash flow? So like,
are there ways that someone
can front run, you know,
the idea of risk before
a bigger, you know, I,
I don't want to say like crisis
necessarily, but if, if your portfolio,
you know, starts performing poorly
more poorly than you expected. Yeah.
How, how could you be more
proactive than reactive? Yeah. Yeah.
Mm-Hmm . And,
and we could stay on the,
the Market Pulse Index topic
for, for that matter. We,
we used some examples earlier
where, because that, that index is,
is taking the more holistic view,
it's going to catch things that,
that a single credit score or
some other type of risk score is,
is not going to to
necessarily account for.
But more importantly in terms
of actually taking action is
it doesn't just tell you, Hey,
there's more stress over here
and less stress over there.
It tells you why there's stress
over here. So it's not, you know,
this population we've seen have their,
their average Market Pulse
Index score decrease. Okay,
that's interesting. You've got my
attention. Why has it decreased?
Is it because, you know,
their incomes have been stagnant that
they haven't been keeping up with the,
the rising costs? Is it because
they're taking on more revolving
debt? Is it because, you know, their,
their savings, their wealth and
assets are, are taking a hit?
The answer to those questions
are what drives that
proactive, those proactive actions that
you can take. And, and because the,
the index can say, here's why their,
their overall score is being impacted,
you could then pull upon the
different data assets that,
that Equifax and others offer to
take that action and say, all right,
let, let me zero in on, on
this particular area that,
that the Market Pulse
Index helped identify.
Since you two challenged
me for another analogy.
I think the fact that Market
Pulse Index really switches from
proactivity or switches from
reactivity to proactivity.
I think because we're looking
at the intersection of debt
capacity and assets, we're really
spotting the mic, like kind of the micro,
like, if you want to
call it a fissure, it's,
we're looking at the fissure
more than the, you know,
than the tectonic shift that's
happening for the earthquake. You know,
and I think that's the value there is
really finding that that fissure that
starts, and that's how lenders
are going to, you know, use,
is they're going to use this
data proactively to find
those small faults before
it turns into a bigger issue.
Okay. So I'm, I'm adding that to my list
of Jesse analogy. So we've got oven,
we've got shields, now we have earthquake.
I'm on a roll. I'm on a roll .
So I, I did see there's a lady bug that's
walking across my window right here.
And, and I know that there's a
lot of symbolism around ladybugs,
meaning like good fortune you know,
luck protection, like all the things,
right? You know, without you
described. So what I'm curious about,
especially with what I wanted to, you
know, close out on with all of you is
what do you,
is your prediction on the US consumer
over the next 12 to 18 months?
And would you dare to venture? Oh.
You're asking us to make
predictions, , that's risky.
We could, we could go all over
the place with this, but let's,
let's take that on. I, I
think it all boils down to
the health of the, the consumer. And
that's, that's not earth shattering,
that's not an einsteinian, you
know, brainstorm right there. But,
but it is the case. When we look
out across the Macron environment,
and we see what is going to make life,
financial life easier or
harder for the vast majority
of, of individuals, that's
where the focus needs to be.
And so starting right off with, with,
you know, the headlines of, of oil,
you know, if that resolves
itself, we, we know that,
you know, even if there's an agreement
that, that we're not going to have,
you know, oil prices come back
to what they were overnight.
But if there's one scenario that, that,
you know, the strait is opened, oil
prices start coming back into, into play,
supply chain quagmires start working
in themselves out, and we, we see,
we, we see the end of the tunnel, you
know, in the, the near future. That's a,
that's a healthy a healthy scenario.
If that doesn't hold true ,
and we start to see, you know,
consumers on a large scale
be even more impacted than
what they have been, then we're
going to have a, a very different,
you know Christmas in 2027 than,
than perhaps we had in 2025.
Yeah. And I think I'd add, since
since Tom took the prediction part,
maybe I'll just call out one potential
hidden risk and one hidden opportunity,
I'd say for a risk really looking at
the remainder of the pivoting middle
population. So again,
that 70% of the population that we
talked about with Market Pulse Index,
understanding that those
households have you know,
they have challenges and so maintaining
their lifestyle, they're using credit,
they're using savings. So what
happens with labor markets?
Are they going to soften? If they soften?
What does that do in terms of
unemployment and, and the impact there?
On the hidden opportunity side, I think
looking at the upper arm, the thrivers,
I know we talked about how that population
is a smaller population segment,
but it's also, you know,
upwards of 50% of all spend,
I think is what I saw in one statistic.
And so really looking at that
population and understanding
how businesses and, and
lenders how they market,
how they leverage
multidimensional data to,
to identify opportunities in that space,
I think it's going to mean
that precision is a, is a,
a critical need targeting that population.
Well I loved how you answered my
question on prediction with an
it depends answer, .
I mean, you have to know
that we we're going to.
We're.
Always going to walk a tight line. I.
Love it. Yeah, , but
it's but it really does depend,
and I think, so when I'm looking at this,
I'm going to be examining the things
that you described from economics
understanding that economic policy,
how things carry through to inflation,
and then tracking all the things we've
been talking about for cash flow on the
top and bottom end of the market,
and specifically where that
middle class might be going.
So that's all I want to know this time.
And I definitely want to thank
my panel Jesse Hardin and Tom
O'Neill. There's a lot of
information we covered.
So thanks to Jesse and Tom for joining
me today. And then to you, our listeners,
I hope you really enjoyed our topic.
If you have any other questions or
suggestions for future podcasts,
you can reach out to
us@advisorsatequifax.com.
We look forward to hearing from you.
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in this podcast are intended as general
guidance only, and are subject
to change without notice.
The views presented during the podcast
are those of the presenter as of the date
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