Latest / Market Pulse / A Shifting Economic Landscape: Consumer Sentiment, Tariffs, and Risk Mitigation

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A Shifting Economic Landscape: Consumer Sentiment, Tariffs, and Risk Mitigation · Market Pulse

• 0:01
  Welcome to the Market Pulse Podcast. I'm your host, Jesse Hardin.
• 0:04
  I'm a member of the Equifax advisory team, and as a group,
• 0:08
  we identify economic considerations.
• 0:11
  We leverage data and analytics to translate that information into industry
• 0:16
  insights.
• 0:17
  This helps us make recommendations to support our clients
• 0:21
  during economic uncertainty and to really uncover growth opportunities in
• 0:27
  consumer and commercial credit risk spaces.
• 0:30
  I'm pleased to welcome our usual cast of characters. I've got Dave Soka. Hey,
• 0:34
  Dave.
• 0:35
  Hey, Jesse. How are you?
• 0:37
  Hey, doing well. I've got Tom O'Neill.
• 0:40
  Good afternoon, Jesse.
• 0:43
  Hey, Tom. And last, and certainly not least we have Maria Urtubey. Hey, Maria.
• 0:47
  Hi. Good morning. Still here, ?
• 0:50
  Yeah, there you go. Yeah, I forgot about that.
• 0:52
  And then we've got a voice missing today. So Emmaline Aliff is is on vacation.
• 0:58
  We we actually do let our people go on vacation. So she's on special.
• 1:02
  I thought. Thought it was special.
• 1:04
  Assignment.
• 1:04
  Yeah, exactly. Yeah. Hopefully it's a good place. So how's everybody doing?
• 1:09
  I know there's a lot going on right now.
• 1:12
  Like what I, I anything happening?
• 1:15
  Yeah, like, well, baseball's, baseball's going again. Oh.
• 1:18
  The important stuff, right? Yeah, absolutely. Well, yeah.
• 1:22
  Yeah. No, there could be, there could be undertones to that. Yeah.
• 1:25
  There's a little bit going on with the economy, I would say.
• 1:27
  Maybe a thing or two.
• 1:29
  Yeah.
• 1:29
  And my football team, Liverpool is nine points away, I believe,
• 1:34
  from winning the leagues. So two or three more games, and we got it in the bag.
• 1:38
  And that's not a knock on on other football teams that people on this
• 1:43
  podcast may or may not be supporting.
• 1:45
  Yeah. That, that we'll not speak of. Yes.
• 1:48
  Yeah. So for the listeners, we've got we've got actually four on the, on the,
• 1:53
  the team here that are that, as Dave said, football fans,
• 1:57
  I would say they're soccer fans, but either, either here nor there.
• 2:03
  Well, good. Well, so I wanna do, you know,
• 2:06
  when we think about where we've gone with you know,
• 2:11
  with things related to the economy,
• 2:13
  what I'd like to do today is really set the stage for a discussion around
• 2:17
  how things have evolved in, you know,
• 2:19
  in the us especially with the macroeconomic picture of where we've,
• 2:23
  where we've gone. There's certainly a lot to unpack. You know,
• 2:26
  when we think about the recent events that we've,
• 2:28
  that we've seen when we started in January, I think there's,
• 2:32
  there's a lot of momentum that we saw,
• 2:35
  a lot of optimism building with the economy. And it's almost like then, wham,
• 2:39
  it's like this policy change and,
• 2:41
  and economic changes that really kind of, you know,
• 2:45
  changed the overall outlook maybe to some extent and to some,
• 2:49
  maybe not to others you know, but what I'd like to do today is, is, you know,
• 2:54
  kind of uncover what we've seen, do a, do a deeper dive,
• 2:57
  and we'll talk you know,
• 2:58
  we'll talk a little bit more about where we see things you know,
• 3:02
  kind of playing out there. Before we do that though,
• 3:04
  I want to take a quick a quick break and we'll we'll let you hear from our
• 3:09
  friends at Moody's and,
• 3:10
  and going through some of the important economic and consumer metrics that that
• 3:15
  are relevant today.
• 3:17
  The global trade war has escalated sharply driving the effective tariff rate to
• 3:21
  levels not seen in over a century.
• 3:23
  Business and consumer confidence have weakened supply chains are under strain,
• 3:27
  and global investment is stalling. The labor market remains resilient for now.
• 3:32
  March saw stronger than expected gain of 228,000 jobs,
• 3:36
  but hiring is slowing and public sector layoffs loom. Meanwhile,
• 3:40
  the unemployment rate ticked up to 4.2% as labor force participation approved
• 3:45
  inflation cooled in March with headline CPI falling 0.1%,
• 3:50
  and core easing to 2.8% year over year.
• 3:54
  But with tariffs set to push costs higher,
• 3:56
  the reprieve may prove short-lived now to monetary policy.
• 4:00
  The Fed is holding steady for now watching for the net impact of tariffs on both
• 4:04
  prices and employment before easing.
• 4:07
  Our baseline is that the US economy avoids recession,
• 4:11
  assuming it deescalation on trade, but the risks are rising.
• 4:15
  A prolonged conflict could erode the United States safe haven status and push
• 4:18
  the economy into a downturn.
• 4:21
  Thanks, Moody's. So,
• 4:23
  it's sort of hard to escape the news cycle right now with the economy.
• 4:28
  We think about where the markets have gone.
• 4:30
  When you see the s and p and the Nasdaq and the Dow, you know,
• 4:33
  some of those are off almost 15%.
• 4:35
  We see some of the confidence surveys whether it's the University of Michigan or
• 4:40
  it's the whether it's the conference,
• 4:43
  board surveys you know, kind of those, those stories, you know,
• 4:48
  show that we've seen decreases in in confidence and
• 4:53
  this notion of uncertainty building in the economy.
• 4:56
  And so I think the bulk of this podcast,
• 4:58
  what we want to do is we want address those changes in the, you know,
• 5:02
  in the economic landscape. But I, I think we want to go a little deeper.
• 5:06
  We want to talk about some of the key drivers.
• 5:08
  We want to focus on what it means,
• 5:10
  but then we want to focus on the impact to consumers and businesses.
• 5:15
  And then, you know, really focus on recommendations that we can make. So,
• 5:20
  so what are the recommendations that we want, you know, we want you,
• 5:23
  the listener to understand as it relates to the portfolios that you that
• 5:28
  you manage. So a good example would be,
• 5:30
  we want to find a practice or two that we would suggest you look at maybe to
• 5:34
  help mitigate some of the impacts that we're feeling right now in the economy.
• 5:38
  So that said, does that sound like a decent plan team? Yes, it does.
• 5:42
  Sounds like quite the undertaking. Yeah. It, it is a lot. Yeah, certainly.
• 5:47
  So, okay. Well, let's get started then.
• 5:50
  So I think the best thing to do would be to start out and just to address how
• 5:55
  did we go from a consensus of kind of stronger economic growth to where we are
• 6:00
  right now, which is that we're probably feeling a little more headwinds,
• 6:03
  a little more economic uncertainty. Dave,
• 6:05
  can I ask you to maybe kick off on that one?
• 6:07
  Sure. Jesse. So, so job security,
• 6:11
  spending power and inflation,
• 6:14
  what was looking rosy a month ago, maybe a couple weeks ago now,
• 6:19
  has us rethinking everything,
• 6:21
  the American consumer as well as businesses are reading the news,
• 6:25
  hearing the announcements, and are now suddenly concerned about the future.
• 6:30
  Most people and businesses prefer to live and operate with a degree of
• 6:35
  certainty in their lives, to have this much uncertainty thrust upon the economy.
• 6:40
  Certainly muddles the waters in terms of an outlook for the rest of the year,
• 6:44
  but obviously,
• 6:47
  businesses as well as consumers have had plans and I would say monitor
• 6:52
  the plans and act accordingly for changes.
• 6:57
  Yeah. Interesting. Dave, I, you know, I,
• 6:59
  as I was thinking about it a little bit further with what you were saying,
• 7:03
  I think it's, it's sort of ironic because when we think about the,
• 7:07
  the data that we're seeing,
• 7:08
  there's almost like this juxtaposition between hard economic data and
• 7:13
  the soft data, which is kinda like that consumer survey,
• 7:16
  that consumer sentiment data. You know,
• 7:18
  it seems like the hard data's not really indicating that there's there's as much
• 7:23
  to worry about the, the soft data.
• 7:25
  The consumer data's maybe telling a little bit different story.
• 7:28
  So it almost seems like you know, are we you know, are,
• 7:32
  are we feeling like consumers are really going to get there in terms of you know
• 7:37
  are they really gonna act on that sentiment that they're that they're
• 7:40
  expressing?
• 7:42
  Yeah. And, and Jesse, I see it as,
• 7:44
  as an interesting mix of that hard and soft data that you referenced,
• 7:48
  not just now, but, but really what we've been through
• 7:53
  it's easy to say for the past year, but really for, for the past five years, we,
• 7:58
  we, we can go back to the beginning of, of the pandemic and say, we've,
• 8:02
  we've been seeing this uncertain mix of hard and soft data for,
• 8:06
  for that length of time. And, and we see that manifest itself in, in,
• 8:11
  you know, the consumer sentiment that you were talking about, you know,
• 8:14
  if people feel okay and, and, but not great. And,
• 8:17
  and how is that impacted by headlines? You know,
• 8:20
  we see things like inflation is, it's under control,
• 8:23
  but it's not quite dead yet. And we,
• 8:26
  we have all of these areas that, that are sort of gray.
• 8:32
  But, but the nice thing is data is still our friend, friend.
• 8:36
  Through all of this, we can still look at what's actually transpired.
• 8:41
  And while no one, none of us at least have, have that crystal ball to say,
• 8:44
  here's what's going to happen in the months ahead,
• 8:48
  we can be pretty intelligent about seeing what the ramifications of all the
• 8:52
  things that we have been through over the last five years and see what the
• 8:56
  impact is on not, not just consumers in mass,
• 9:01
  but different populations, different cohorts and,
• 9:03
  and different segments of the society as well as, you know, different, you know,
• 9:07
  small business and commercial enterprises.
• 9:09
  Yeah. Tom exactly that it's been five years.
• 9:13
  So are we still feeling this uncertainty?
• 9:16
  What are the reasons behind the consumer sentiment,
• 9:19
  and why is this soft data showing four consecutive months of decline?
• 9:24
  And is it just a sentiment, as you said, consumers are reacting,
• 9:28
  they're being more cautious, they're cutting back on spending,
• 9:31
  even assessing if and when to make big purchases. Is it the right time?
• 9:37
  All these behaviors, as you said, manifesting that sentiment,
• 9:40
  not just standalone sentiments we've been discussing internally and how it
• 9:45
  shows, for example,
• 9:46
  in the big spread of consumers reactions some needing to
• 9:51
  make the car purchase and acting quickly given the impact on car, car tariffs,
• 9:56
  others not faced with a need, postponing the big purchase,
• 10:00
  not at this moment sticking to necessities.
• 10:05
  Yeah, and I'm, I'm raising my hand. I'm one of those that,
• 10:07
  that went out and took advantage of the, the car purchase while I could.
• 10:11
  So definitely something that, that we've seen and makes a lot of sense.
• 10:15
  So let's let's switch gears and talk about, you know,
• 10:19
  probably arguably one of the you know,
• 10:22
  one of the biggest impacts that we're fee that, that we're seeing right now,
• 10:25
  and that's tariffs. So I'm gonna start, Tom with you then,
• 10:29
  if I could maybe talk a little bit more about the importance of tariffs and the
• 10:33
  potential impact that we see both to American consumers and business owners.
• 10:38
  Yeah. So, so the, the basic answer to that, what is a tariff?
• 10:42
  Tariffs are a charge on, on imports or exports depending upon the country,
• 10:46
  you know, levying the tariffs. They are an additional fee.
• 10:51
  And, and, and that, that fee is placed on the,
• 10:53
  the ability to bring in goods and services from other places.
• 10:57
  And the impact to the consumers and to businesses here in the United States
• 11:02
  really depends on the size of,
• 11:05
  of those tariffs and what those tariffs are and, and what they're on.
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  You know, it could be on,
• 11:12
  on a particular item that's of essential need and that there's no real
• 11:17
  substitute for. So it's not something that,
• 11:19
  that the consumer can easily switch to buying something different or buying a
• 11:24
  domestic version of that. And in those cases, that, that,
• 11:30
  that additional cost is going to be felt very directly on the consumer or the
• 11:34
  business making those purchases.
• 11:36
  Or it could be something where there is a lot of flexibility. You know,
• 11:38
  maybe there is the, an alternative to drive towards a domestic version of it,
• 11:43
  you know, that's not incurring that price. So it, it's, it, it is one of those,
• 11:48
  it depends types answers. But,
• 11:52
  but essentially it is an increase in the cost of those,
• 11:55
  those different items. And as we've been seeing
• 12:00
  the impact of,
• 12:02
  of what that is isn't gonna be felt until we actually see
• 12:07
  what, what actually plays out. You know, what are those going to be? What,
• 12:12
  what is the, what is the sustainability of those, those tariffs, you know,
• 12:16
  is it something that that there's going to be reciprocation on?
• 12:20
  Is there going to be resolution on those? So, so ultimately the impact, what,
• 12:25
  what, what flows into the hard data that we're going to be seeing, you know,
• 12:30
  will take some time to, to manifest itself, but as, as I was mentioning before,
• 12:35
  we can at least look at some parallels, for instance,
• 12:39
  like some of the inflationary periods that we went through and say, okay,
• 12:42
  if some of these things come to pass, if we see, you know,
• 12:46
  increases in affordability issues, what has been the impact?
• 12:49
  What sense can we make from that? What,
• 12:51
  what strategies can we take to account for that?
• 12:56
  Yeah, Tom, I use kind of one of the, the words that I love to use with my kids.
• 13:01
  And it goes back to the, it's not a one size fits all stories. It,
• 13:05
  it truly depends,
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  and I'm gonna kind of highlight business as well as consumers.
• 13:11
  And so for businesses kind of relying on overseas suppliers,
• 13:15
  the impact potentially is really huge.
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  Think finished product manufacturers or even your local restaurant who sources
• 13:23
  product and supplies from other countries
• 13:27
  shifting to families.
• 13:29
  It could mean fewer tree toys under the Christmas tree this year,
• 13:33
  the cost of toys imported from China will be at least 50% higher given the
• 13:38
  current levels.
• 13:39
  So that added cost to a household budget could result in half as many toys under
• 13:43
  the tree this year. It all boils down to the consumer,
• 13:48
  the business,
• 13:49
  and where they make purchases from and where those products originate from.
• 13:56
  Yeah, that's, that's interesting, Dave. I, I know when I'm talking to customers,
• 14:00
  I get a lot of questions about like, how do I measure the impact of tariffs?
• 14:04
  And I was thinking about a study that Yale brought up. It was a,
• 14:08
  a study from the Yale Budget Lab. And there was a,
• 14:12
  an impact graph that was, that was really telling to me,
• 14:15
  and it looked at the impact of overall disposable income.
• 14:19
  And Tom, I think when you talked about the definition of tariff,
• 14:23
  I think we know that tariffs can tend to be a regressive tax on
• 14:28
  on consumers, right? You know, the,
• 14:29
  the idea that it's that we will see more of an impact on disposable income
• 14:34
  from lower income households. And that's that's always a worry.
• 14:38
  I think we've heard economists we work with, with Moody's a lot,
• 14:43
  and one of the things that we've heard is there's a rough estimate that you can
• 14:47
  use, which is for every sustained percentage point increase in the tariff rate,
• 14:53
  we would potentially see that inflation could be impacted by 10 basis points.
• 14:58
  And GDP by seven basis points to the negative. That's,
• 15:02
  that's kind of a lot of math. The way I boil it down is really the impact to,
• 15:08
  you know, to us as Americans is that, you know,
• 15:11
  things can be more expensive and, and really, it, it, you know, it may,
• 15:15
  it may you know, drive the,
• 15:18
  the overall outcome that consumers like, like all of us you know, have.
• 15:23
  And so I think that's you know,
• 15:25
  certainly when we think about the overall impact, that's one that I,
• 15:27
  that I watch just because it's it's, you know, one,
• 15:30
  it's kind of fun to see the math, but then it's really interesting, I think to,
• 15:34
  to, you know, truly gauge where, where things might be going.
• 15:39
  And, and this translates, as you were saying,
• 15:42
  just into the decrease in spending right. How is real income trending over time?
• 15:47
  Even personal savings we're up to the low four percent this year
• 15:52
  after reaching 3.3 percent low in December,
• 15:56
  but still away from the historic average of seven point 0.5
• 16:01
  let alone of course,
• 16:02
  the 30 percent savings rate during covid times with stimulus money.
• 16:07
  So those savings are now diminished or gone.
• 16:11
  Consumers have to now assess exactly what their disposable income is and what
• 16:15
  their savings are. And you might ask yourself,
• 16:18
  how can I now limit my purchases to essential,
• 16:21
  so even switch brands that are more aligned with my cuts in spending based on
• 16:26
  the reality that I have ahead. And in the case of our customers,
• 16:30
  for example, the lenders,
• 16:32
  they're still facing these same challenges since their customers are these
• 16:35
  consumers. They might want to grow with new customers,
• 16:38
  they might want to better manage their current customers,
• 16:42
  and they're trying to mitigate risk balancing growth objectives.
• 16:45
  But all of these are the same consumers with declining consumer
• 16:50
  sentiment that are pushing back.
• 16:53
  Yeah, great point. Maria. I was even, you know,
• 16:56
  I was even thinking about an example, I, I ,
• 16:59
  I was talking to a friend of mine that has a, a business here locally.
• 17:03
  It's a tile and flooring business. And it was interesting,
• 17:06
  we were kind of talking about tariffs, and one of the things that,
• 17:09
  that he had mentioned to me is that they, they have a small location,
• 17:14
  and they were really looking to expand this year. They had,
• 17:16
  they had put together a fund to, to try and build a new location.
• 17:20
  It was interesting that the,
• 17:23
  the outlook now for his business is such that he had to take all of that money
• 17:27
  and, and apply it towards inventory to try and, you know,
• 17:30
  and try and beat the the tariffs so that he can stay competitive. And,
• 17:35
  you know, that's one of the things, as I think about it,
• 17:37
  obviously that's just one example. It's not you know,
• 17:40
  it's not happening across the board, but when we think of the impact, you know,
• 17:45
  for businesses, maybe they were thinking one way at the start of the year,
• 17:49
  and they really had to shift their thought process.
• 17:51
  And that's something that I think is you know, is certainly,
• 17:54
  we may not have anticipated that at the first of the year that we would be
• 17:58
  thinking of, you know, major business shifts, but it is one that's happening.
• 18:01
  Yeah.
• 18:01
  I, I like that example you gave the,
• 18:04
  the small business example that you just gave there, Jesse, and,
• 18:07
  and turning it again, back to the, the consumer view,
• 18:11
  not all that different. You know, we know that the,
• 18:13
  the impact's going to be felt differently by by different populations.
• 18:19
  And, and, and we've actually seen some of that. And,
• 18:22
  and this goes back to what I was saying earlier in that, you know,
• 18:24
  we could even,
• 18:25
  as we're heading in times of uncertainty and heading into more uncertainty,
• 18:30
  we could still look at the data that we do have to make some intelligent,
• 18:34
  you know, sense out of what's going on. And, and, and we've, we have,
• 18:40
  I guess,
• 18:40
  sorry to say some rich data on the impact of inflation over the last few years.
• 18:46
  We know that the, the KS shaped economy is real. That,
• 18:49
  that there have been people since the pandemic that have been,
• 18:55
  if not, you know, just, you know, making due,
• 18:58
  but even thriving in some cases, you know, through all of these conditions.
• 19:02
  And we know that there are a large portion of the populations that are really
• 19:06
  struggling with affordability and other factors. And,
• 19:09
  and that's gonna be exasperated, you know, with this as, as tariffs do incur.
• 19:14
  I'm not gonna go all Grinch that Dave did and, and talk about, you know,
• 19:18
  boys under the tree. But, but that is the impact. You know,
• 19:22
  family households are going to feel this differently. Some are,
• 19:27
  some are going to wave it off as a nuisance.
• 19:29
  Some are going to really struggle with their, their basic household needs.
• 19:34
  And, and we saw that with inflation, we have the, the potential of seeing,
• 19:39
  you know, this to some degree as the result of, of sustained tariffs.
• 19:44
  Yeah, it's a, I think a great point, Tom. I mean, obviously if, if, you know,
• 19:48
  if you follow economic data,
• 19:49
  we got some of the spending spending data today it, it's, you know,
• 19:55
  consumers are already kind of indicating that they're hoarding, you know,
• 19:57
  getting, getting that you know, that last purchase end. So yeah, it's,
• 20:01
  it's interesting to see the you know, sentiment play out. So I think,
• 20:07
  you know,
• 20:07
  that certainly great points related to headwinds around you know,
• 20:12
  around the tariffs. Let's kind of brings me to my next my next thought,
• 20:16
  which is leading indicators.
• 20:19
  What leading indicators should we really be watching for? I know economists,
• 20:23
  you know, they look at and, and even market watchers, you know,
• 20:27
  they're looking at data, they're trying to understand what that data tells them,
• 20:30
  but but what indicators, if we think of our customers you know,
• 20:34
  should they be looking at to get a better idea for whether or not you know,
• 20:39
  the, the consumer is really starting to act on the,
• 20:42
  the sentiment that they're providing. Dave, let's go ahead and start with you.
• 20:46
  Yeah, thanks. And some of.
• 20:46
  That thunder has been stolen already,
• 20:49
  so and I'll try to be not Grinch like for, for you, Tom.
• 20:52
  So so there's really two things. So the, you know,
• 20:56
  the health of the US economy relies on consumer spending.
• 21:00
  So the spot potential recessionary trends pay close,
• 21:04
  close attention to consumer behavior.
• 21:07
  Are people rushing to buy those big ticket items like cars and appliances ahead
• 21:11
  of tariff increases,
• 21:13
  surprised they have been are they using their tax refunds to pay down debt,
• 21:18
  or will they still be spending freely to facilitate those pull those big
• 21:21
  purchases being pulled forward? Changes in these spending patterns can signal a,
• 21:26
  a shift in consumer confidence. On the other side,
• 21:31
  additionally, job numbers are a crucial indicator.
• 21:35
  Our recent C-N-B-C-C-E-O poll showed a percentage of CEOs anticipating or
• 21:40
  considering job reductions this year,
• 21:43
  we need to monitor employment closely as another potential sign of an economic
• 21:48
  downturn.
• 21:52
  Yeah. So, yeah, definitely. I, I think very,
• 21:56
  very insightful points, Dave, when we think of the economy and, and you know,
• 22:01
  jobs certainly we've seen consistency in the unemployment rate.
• 22:05
  But yeah, I, I think to to, you know,
• 22:08
  to some of the conversations that we've heard around, you know,
• 22:11
  the employment rate, how, how quickly it went up towards the,
• 22:14
  the fourth quarter, and so yeah, that great great insight there.
• 22:18
  One other thing that I would add to that you guys are providing
• 22:23
  some,
• 22:23
  some great indicators from sort of that macroeconomic perspective.
• 22:29
  And I'm gonna, I'm going to go to my tried and true role and,
• 22:32
  and turn it back to the consumer again and, and say, one of the things,
• 22:35
  especially for our clients to be looking at at this point,
• 22:39
  are those delinquency rates as, as boring as those,
• 22:43
  those are as traditional as those are, those are going to be the first signs of,
• 22:48
  of where we're starting to see more consumer stress. And,
• 22:53
  and, and that's particularly
• 22:57
  relevant given not just tariffs and,
• 23:00
  and the things that we've been talking about here,
• 23:02
  but everything that's going on, you and, and we're even to the point of,
• 23:05
  you know the resumption of student loan delinquencies and the impacts of those.
• 23:10
  So from a consumer standpoint, from a lending standpoint,
• 23:13
  it's always important to, to be monitoring those risk levels and,
• 23:18
  and any changes to what's happening off of your portfolio. But, you know,
• 23:23
  it's, it's goes without saying that's,
• 23:25
  that it's particularly important right now.
• 23:28
  And, and I was going to add in terms of indicators, Jesse,
• 23:31
  that you were asking about,
• 23:32
  we could also argue home equity has reached 35 trillion on the other
• 23:37
  hand. So this 80% increase since the beginning of 2020 is
• 23:42
  phenomenal. But at the same time, we're hearing concerns,
• 23:45
  not just relating to the high borrowing costs,
• 23:48
  but the increase in property taxes and homeowners insurance,
• 23:52
  and these individuals are hesitating, what do I do next?
• 23:56
  How do I meet these payment obligations?
• 23:59
  We could also argue 60% over 60% of the US is a homeowner,
• 24:03
  but most carry a mortgage.
• 24:05
  So they're likely asking all of these questions we have to keep in mind the
• 24:10
  overall associated housing costs besides, of course,
• 24:13
  the consumer spending and the necessities of households.
• 24:17
  And then we have the renters,
• 24:18
  they are part of the uneven k shape economy that Tom was
• 24:23
  discussing. And we are, they're facing even more challenges right now.
• 24:29
  Yeah. great, great comment. Maria,
• 24:32
  I was even as I was thinking about that, I was, I was thinking about and,
• 24:36
  and I'll close this section out, but I was thinking about the,
• 24:38
  the idea of the wealth effect. So we, we think of the wealth effect,
• 24:42
  it's this notion that consumers react when there's a stronger con, you know,
• 24:46
  confidence level in their personal wealth. They may spend more,
• 24:50
  they may consume more when assets are higher than than when they're not.
• 24:54
  And like you said, Marie, there's a lot of home equity,
• 24:56
  there's a lot of investment asset out there. And,
• 25:00
  and so when we see things like 401k statements, and I would,
• 25:04
  I would encourage everybody, maybe don't open those right, right away. You know,
• 25:09
  but certainly, you know, when we, when we see those,
• 25:11
  those those downtrends and assets you know, it's,
• 25:15
  it's a good indication I think of where confidence level is and, and how to,
• 25:19
  you know, how do consumers react to seeing that comfort, that, that comfort,
• 25:23
  that that wealth brought you know, to have, have an impact.
• 25:27
  And so you know, that that can also kind of lead to stress levels that,
• 25:31
  you know, that change you know, consumption and, and and economic behavior.
• 25:37
  So, okay. That's great. So what I'll do is you know, last five minutes,
• 25:40
  I want to switch gears and really talk about those best practices, though,
• 25:43
  the things that we can we can impart on our listeners really as they observe
• 25:49
  what's happening in the economy,
• 25:50
  things that they can do to help mitigate the stress and,
• 25:53
  and really kind of get over the you know, over the, the,
• 25:57
  the hump initially of like looking at the data,
• 25:59
  but then how do we react to that? So Tom, let's start with you on that.
• 26:04
  Sure. I'll, I'll, I'll kick that part off and, and really what I'm gonna say is,
• 26:08
  is gonna come across as a bit self-serving, you know, coming from, from Equifax,
• 26:12
  but, but really the,
• 26:13
  the way to reduce uncertainty is with information and,
• 26:18
  and applying that information on a regular,
• 26:22
  frequent basis is the best way of not only being able to
• 26:27
  understand the situation as it is,
• 26:28
  but also to pivot as that situation changes over time. And, and,
• 26:33
  and we know that that's going to be the case, whatever that uncertainty is,
• 26:38
  we know that the uncertainty is going to exist. And so work with the,
• 26:42
  work with the information at hand, you know,
• 26:45
  stay fluid in terms of your,
• 26:47
  your strategic development and be able to adapt
• 26:52
  and, and, and as we see that the, the customers that are dealing with,
• 26:56
  with additional stress
• 26:59
  start showing signs of that you'll be in a position to not only, you know,
• 27:04
  protect yourself, protect your portfolio,
• 27:06
  but also work with them to help them through these particular times of,
• 27:10
  of transitory, you know, struggling. Yeah.
• 27:13
  Maria, how about you?
• 27:14
  Yeah, I will go back to what I said earlier in how to find that balance between
• 27:19
  mitigating risk and looking for those growth opportunities in these uncertain
• 27:24
  scenarios. As Tom was mentioning,
• 27:26
  you will need to fine tune or even be more intentional or targeted with new
• 27:31
  customers and existing customer management.
• 27:34
  And it is going to be harder now to identify these pockets,
• 27:39
  even if limited. But if you want to identify these segments,
• 27:42
  you need more data and insight.
• 27:45
  You need to be more orderly in how you're using that data,
• 27:48
  how you're leveraging the trends to find those limited opportunities.
• 27:52
  So that's what you want to make sure you do.
• 27:54
  Istan was saying as frequently as possible, as fine tuned as possible,
• 27:59
  given there might be fewer, but there's still, there still are opportunities.
• 28:03
  And of course, if you're first during uncertain times,
• 28:07
  you're ahead of the game once things start picking up again.
• 28:10
  Yeah. Thanks Maria and Tom, and I guess I, the one thing I would add,
• 28:13
  and that's based upon conversations that I've had over the last several weeks
• 28:17
  with both consumer and commercial lenders is that a lot of them are taking
• 28:22
  a wait and see approach in terms of any kind of changes to be made.
• 28:26
  And some of you said this in our,
• 28:27
  in our market pulse survey over the last couple of months as well.
• 28:31
  Obviously business plans were made coming out of Q4
• 28:37
  and, and heading into 2025,
• 28:39
  and things were a lot different just a few months ago.
• 28:41
  So a lot of companies are out there saying it's a little too early to decide.
• 28:45
  And that's really what I think
• 28:48
  building on both what Tom and Maria have said is that it's not time to panic.
• 28:53
  If you've got sound business practices, you're in good shape.
• 28:58
  You've,
• 28:58
  you've got formative formalized lending as well as
• 29:03
  account management policies in place and strategies,
• 29:06
  just make sure you're staying on top of them with the right information and then
• 29:09
  taking appropriate action in a timely fashion,
• 29:13
  and that'll help mitigate any kind of uncertainty that you might experience.
• 29:16
  Yeah, I, I wholeheartedly agree, Dave. And, and,
• 29:19
  and I'd like to play off of what both Maria and Dave were,
• 29:23
  were talking about there. Dave mentioned having, you know,
• 29:26
  the sound strategies that,
• 29:28
  that that that lenders have put into place
• 29:33
  at the end of 2024 to see how they're,
• 29:36
  they're going to approach 2025 and how a lot of them are in a wait and see,
• 29:40
  you know,
• 29:40
  mode to see what kind of events play out and what the data does start
• 29:45
  saying. And of course, that's going to be a a,
• 29:48
  an interesting thing to finish to figure out as well is like,
• 29:51
  how long do we stay in that, wait wait and see,
• 29:54
  because ultimately the move the world is continuing to move forward.
• 29:58
  So at some point we need to act,
• 30:01
  but I'd like to to sort of emphasize some of the point, you know,
• 30:03
  one of the points that Maria was making,
• 30:05
  that having the ability to be flexible and not necessarily
• 30:10
  sort of just work in a reactive mode could very well work in your
• 30:15
  favor. A lot of lenders potentially could be clamping down. Yeah.
• 30:19
  And we see that in times of uncertainty. We see the,
• 30:21
  the natural inclination to sort of pull back.
• 30:25
  And we also see that in those periods there are frequently
• 30:30
  opportunities for growth opportunities to take advantage where others are
• 30:33
  pulling back to go in and fill the need that is exposed.
• 30:37
  So this is what we're talking about in terms of being able to not just
• 30:42
  look at that data and, and look at it frequently,
• 30:46
  but also to be able to adapt and move fluidly as a result of looking at that
• 30:51
  data and, and not just mitigate risk,
• 30:54
  but also to take advantage of opportunities.
• 30:56
  Yeah, and I think I'll, I'll close this out really playing off on,
• 30:59
  on almost everything that you guys said, which is don't forget your experiences.
• 31:04
  We've think, you know, we think about the,
• 31:06
  the last five years or so in the economy that we faced in the pandemic and
• 31:11
  leading, you know, to after the pandemic, we had higher inflation,
• 31:15
  we had more stress, there was inventory shocks.
• 31:19
  Certainly the drivers may be different now than, than than then.
• 31:23
  But what I, what I think is, you know,
• 31:25
  a good thing to remember is that we have good data.
• 31:28
  We can see what those behaviors were a couple of years ago, and that data is,
• 31:32
  you know, is the experience that we have that we can play off of and,
• 31:35
  and really look at what it told you.
• 31:38
  So I'm sure all of our customers did postmortems on what that,
• 31:42
  what that data looked like,
• 31:43
  doing analysis to see what the reaction of consumers at that time was.
• 31:48
  And so build that baseline and really use that,
• 31:51
  that information that you had and,
• 31:53
  and think about how maybe we see similarities to where we are now and
• 31:58
  differences, and then react to that data. I think that's you know,
• 32:02
  that's kind of a culmination of,
• 32:03
  of all of what we said in terms of how to react.
• 32:07
  So I think then what we'll do is we'll call that a podcast.
• 32:10
  I want to certainly thank my panel. It was a, a great panel today.
• 32:14
  A lot of information we covered.
• 32:16
  What I would say is if you have any questions or suggestions for future
• 32:21
  podcasts,
• 32:21
  you can reach us at risk advisors@equifax.com and we all look forward to hearing
• 32:26
  from you and be well.