In 2025, major U.S. stock indexes including the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have reached multiple record highs. Their rise has been driven by enthusiasm over artificial intelligence and expectations that the Federal Reserve will continue lowering interest rates. At the same time, several key economic indicators point to growing weakness in the real economy. Commercial mortgage-backed security delinquencies have reached an all-time high, subprime auto loan delinquencies are rising faster than they did during the Great Recession, and severe credit card delinquencies are at their highest level since 2011. These trends suggest that businesses and consumers may be in a more fragile position than the stock market’s performance suggests.
Even with these warning signs, history provides reassurance for long-term investors. Economic downturns are inevitable, but they tend to be short compared with expansion periods. Since World War II, recessions have typically lasted less than a year while expansions have often continued for many years. Stock market data shows a similar pattern, with bear markets tending to be brief and bull markets lasting far longer. Over long periods, investors who stay focused on the long term have historically been rewarded.
https://finance.yahoo.com/news/foundation-u-economy-appears-breaking-144400992.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAHDw8WXhyt3gFCGYrc862oXfMbUHmcLNGL395ZOOwOa7x_SrD19kCCSsD--d3BVL27eLc7SHVlwJshYHhZCjXyoPNdt0MSdwJc2KaNS8xkr3HMRtqGHZnOmrPo5iOedGa-YUAiCR_RNkJTQTwuLBDfVdkdQIEhmKtu_nW1Hj5JdR
It is strange to me that the stock marker it surging. There seems to be disconnect between Wall Street and the average American's feelings.
ReplyDeleteThis is a great summary of how Wall Street and the real economy can move in different directions. Do you think rising delinquencies could eventually force the market to “catch up” to the weaker economic data, or will AI and rate cuts keep pushing stocks higher anyway?
ReplyDeleteStocks keep hitting records on AI hype and hopes for lower rates, but parts of the real economy look weak. Commercial real estate, subprime auto loans, and credit cards all show rising lawlessness. Signals that households and some businesses are under stress.
ReplyDeleteFor long-term investors, history still favors patience. Recessions are usually short, expansions last longer, and staying diversified with an emergency cushion helps you ride out the bumps.