US Personal Loans Market as a Safe Haven

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Last week we witnessed dramatic declines of the stock markets all across the world.

The last time something like this happened was in 2008, when subprime mortgage crisis broke out in the US. Now speculations intensified about the likelihood of a similar crisis in the near future. However, it is too early to make such conclusions.

The thing is that events that preceded the 2008 crisis did not happen suddenly, but quite naturally.

A year before the crisis, a gradual and then accelerating rise in US unemployment had begun.

According to the United States Department of Labor, in March 2007 unemployment rate was 4.4%, and reached 6.5% by the end of the year before it skyrocketed to 10% by October 2009.

Jobs creation also slowed dramatically in 2007, and in 2008, it had actually turned into job cuts. This situation persisted until early 2010.

At the same time GDP growth slowed before it turned negative for one and half year.  At the peak of the crisis, the US economy contraction reached 4%. In other words, stocks markets followed the economy not otherwise.

Now the macroeconomic situation is diametrically opposite. U.S. and global economic growth have just gained steam, and there are no signs of overheating. US jobs market has reached the full employment, and there is a strong possibility that by the end of 2018 unemployment rate will fall to 3.5%. Besides, there are some signs of inflation picking up.

Stock markets have reached historic peaks, and in these conditions, market correction was only a matter of time. The speed of mass selling this week was ignited by solid US jobs data, namely stronger-than-expected growth in wages. That prompted fears that the Federal Reserve may have to raise interest rates quicker than initially thought. Besides, some investors were already ready to exit long positions

Despite the recent market slump, we believe the fundamental background looks solid. Corporate earnings have never been higher, and U.S. and global economic growth have gained steam.

However, despite positive perspectives in 2018 investors should be ready to higher volatility and worries that inflation rise may cause faster rate hikes from the Federal Reserve and somewhat slower US economy growth in the second part of the year. Higher bond yields also make stocks look less attractive by comparison.

On this background US personal loans market looks like the real winner. US consumer spending shows no sign of slowing in 2018. US retail sales continue to rise due to the growing household incomes, soaring confidence, and healthy appetite for consumer debt. Higher house prices also indicate growing economy.

Therefore, it is safe to say that consumer lending in the US will keep its triumphal rise for the rest of 2018 due to the combination of strong growth, solid labor market, higher rates, balanced situation with the delinquency rates, and easy access to the loans.

Besides, the market will get support from a stronger global economy, rising business activity in the US, higher capital investments, and rising wages.

In the near future, US consumer lending market will grow at an accelerating rate and some moderation expected only in 2019-2020.

So, even if the stock and currency markets at times will storm, and commodities will respond to the vagaries of the weather, personal loans market looks set to remain as a relatively safe haven for investments.

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