Financials: Consumer Finance Outlook

The consumer finance sector has outperformed the S&P 500 over the past year, with credit quality exceeding expectations despite some declines. In this recording, CFRA’s Vice President, Equity Research Alexander Yokum, CFA, highlights that the recent unemployment uptick is due to workers joining the labor force rather than layoffs. While the savings rate is down, most consumer debt is fixed-rate, thus cushioning the impact of higher interest rates.
Alexander also comments that credit card debt levels are reasonable when put in perspective, and sector credit quality remains within management’s expectations. He suggests that financial advisors may find opportunities in Ally Financial, which stands to benefit from improved auto loan affordability and reduced competition, and American Express, which is well-positioned in the high-end market. Further insights are available through MarketScope Advisor.