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What the Equifax Market Pulse Index Reveals About the U.S. Consumer · Market Pulse

• 0:00
  .
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  Welcome to the Market Pulse podcast from Equifax,
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  where we break down the latest economic and credit insights to help you navigate
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  today's business landscape.
• 0:14
  Welcome to the Market Pulse Podcast. I'm your host,
• 0:17
  Emmaline Aliff leader of the Equifax Advisors,
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  the Equifax advisors aligned strategy and execution by
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  translating economic and industry trends into practical Equifax,
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  data backed insights and stories.
• 0:31
  We equip executives with data-driven narratives to make clear strategies,
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  clear strategic and tactical decisions. In other words,
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  we don't just study the economy, we operationalize it for a competitive edge.
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  And before we kick off,
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  our economist from Moody's will provide an update on the macroeconomic
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  environment.
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  I'm Justin Begley, an economist at Moody's Analytics.
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  June marked the first federal open market committee meeting for Kevin Walsh As
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  chairman, the committee left the Fed funds rate unchanged at 3.5 to
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  3.75%.
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  An updated summary of economic projections show that an improved labor market
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  and accelerating inflation have taken rate cuts off the table and pushed
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  policymakers. Projections for the Fed funds rate higher.
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  The prospect of policy tightening triggered a negative reaction in financial
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  markets pushing short-term treasury yields higher.
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  The median FOMC member now expects 1 25 basis point rate hike to be
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  appropriate. This year in March,
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  the median projection was for a quarter point cut.
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  The median fed official forecast puts PCE inflation at the end of 2026
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  at 3.6%,
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  up from an expected 2.7% in the March outlook.
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  As the fallout from the energy price shock from the conflict in Iran will take
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  time to dissipate core PCE, which excludes food and energy.
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  According to the median projection is expected to reach 3.3% in the fourth
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  quarter of 2026, up from 2.7% in March's SEP.
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  Meanwhile,
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  growth projections were modestly revised downward as the US economy remains
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  largely resilient even amidst the global supply shock.
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  Our June baseline forecast removed the rate cuts that were previously penciled
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  in for the end of 2026 and early 2027. Instead,
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  we assume that that current current policy holds in the near term to
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  immediate term tariff inflation has made its way through to consumers,
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  and the worst of the energy shocks impact on headline inflation is expected to
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  be concentrated in the middle of this year. Consumers are still spending,
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  which is good news, even amid elevated cost of living pressures.
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  And the labor market is showing more signs of life than it had previously in the
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  year and much of last year.
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  These dynamics have taken any policy easing off the table for this year,
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  even as they do pass. However,
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  the productivity gains from artificial intelligence will likely lift the neutral
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  rate by 2028, and absent any other shocks,
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  diminish the need to ease monetary policy further.
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  Welcome to this month's edition of our Market Pulse podcast.
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  We're here to talk about the macro economy and specifically the things that
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  we've been studying around Market Pulse Index.
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  Before we jump into the questions,
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  we've had a lot of things going on this summer in our team.
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  We talk a little bit about the World Cup, what's been on your minds with us,
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  some of the latest things that have been happening in the sports world. Do.
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  I have to keep that just to the World Cup or you,
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  you did say Sports world because sports.
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  World is fine domain.
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  If it's broader, then I'll, then I'll I'll brag on my Washington Nationals,
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  and by brag I mean that they're somewhat respectable for a change,
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  which is for a national span. That's, that's huge. You know,
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  not seeing them at the bottom of the standings is,
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  is something I'm still getting used to.
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  But as far as the World Cup is concerned, you know,
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  Ireland and Italy didn't make it. So it's, it's all focused on the US I guess.
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  Yeah, I watched the Spurs closely,
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  the Spurs and the Knicks and the NBA and that was pretty painful to watch.
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  So I'm, I'm I'm following the World Cup.
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  Hopefully the US will will do well, but I'm,
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  I'm still a little bit pained by the the performance that the Spurs had.
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  Yeah, it's, it's been kind of fun to watch all of the,
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  the culture from the World Cup to me, like with I, I enjoyed like the parades,
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  like the, the Scottish audience was having. And then, you know,
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  how they were like chanting at at other venues and things like that.
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  It was quite quite fun and interesting for me. and I,
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  I did go to the Braves game recently. I was there on Pride Night,
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  which was really a fun experience.
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  I did read about the consumption of beer,
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  so it would be interesting to see if if we see any, like,
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  indicators in our GDP or in our consumer spending with respect to beer.
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  I think it sounds like the Scots have Dr have drank all the beer out of Scotland
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  and or sorry, out of Boston.
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  Out of Boston. I think it was Boston.
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  Yeah. Yeah. Yeah. So that's should be interesting.
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  That's quite, quite a feat, I guess, to, you know,
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  pivot a little bit back into the macro environment.
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  We oftentimes will talk about,
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  you know like what's happening from a vibe perspective or data perspective.
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  Jesse, when we think about like the, you know,
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  when we hear in the news that inflation is sticky and, you know,
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  top line economic indicators you appear to be stable and the
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  quote unquote vibe on the street feels a little tight. Why are,
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  you know, traditional lagging indicators like GDP or other things
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  potentially missing parts of the story of the US consumer right now?
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  Yeah, so I think it's a classic case of what what everybody's calling the vibe
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  session.
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  I think if you think of us really with the role that we play with business
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  economists, we know there's kind of cold hard math behind the vibe.
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  So when you look at traditional indicators like GDP,
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  they're a good source for telling us maybe where the ship was three to six
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  months ago.
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  They're a little bit weaker at exposing the holes that are currently forming.
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  When you think of the top 10 or 20% of the economy increases in
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  their spending is significant because it's spending and it's being backed by
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  assets that are booming.
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  Top line GDP then looks incredibly stable and healthy,
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  but for the average you know,
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  you're seeing that it completely massed the micro stresses that are happening
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  across things like grocery checkout or gas, you know, at the gas pump.
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  And that's like the other 80% of the population. And so, you know,
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  I think it's really indicative like GD P's telling us that money was spent,
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  but it doesn't really tell us how life was financed.
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  And so I think it's really a question of then if,
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  if we're seeing that it was financed out of rising wages or if, you know,
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  our households are having to tap into dwindling savings that's really
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  different than, you know, just an average that's kind of, you know, kind,
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  kind of consistent. And so that's why I think that that indicator of GDP,
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  it's a great measure, but it's one that we kind of have to watch and,
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  and look at the nuances behind it.
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  And that's really what we did when we built Market Pulse Index.
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  Yeah, Jesse,
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  you you used an analogy that I think you probably read from somewhere else,
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  you know, but I thought it was extremely clever. Like, if you have a,
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  an individual whose head's in the oven and his feet is in the, the freezer,
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  the average is normal body temperature.
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  But that doesn't really tell the story that that's that individual is in.
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  And I think, you know, to your your point, you know,
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  looking at a single macroeconomic number,
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  whether it's GDP or anything else that's aggregated or averaged,
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  it's obviously missing a lot of the detail of what's actually happening
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  underneath. Yeah. Thanks.
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  Tom. Now I got to come up with another analogy. .
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  I'm sure, I'm sure you could come up with one.
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  I'll come up with something.
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  Good. One of the things that we,
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  we oftentimes talk about is the lag effect.
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  And when we think about a lag effect, you know, we see prices rise,
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  but consumers don't necessarily change their habits immediately.
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  And as prices rise, they may spend, you know, less,
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  but their cashflow is definitely potentially impacted by that.
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  And sometimes delinquencies will, you know, could be on the rise. Tom, when you,
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  when you're we're thinking about like lag effect,
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  because I know you've studied this quite a bit, maybe you can comment on,
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  you know,
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  how we try to examine things with through a Market Pulse Index lens that
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  sure. You know,
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  capture and understand those hidden financial stresses about missing a payment,
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  for example.
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  Good or bad, depending on how you look at it. We've,
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  we've gone through a huge case study of this with the impact of inflation
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  recently where yes,
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  eventually those stresses caused by rising prices
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  become apparent within a credit score and other measures because, you know,
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  people start missing payments, you know, we see balances grow and so forth.
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  But even before then, when you're taking a look at the holistic picture,
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  you see changes in spending,
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  you see changes in savings, amounts in overall wealth.
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  You start to see debt to income shifts as,
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  as people are relying more on credit and paying maybe, you know,
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  minimum balances as opposed to larger balances.
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  And all of this is stuff that happens predictably prior to the things
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  that really have an impact on credit scores, like missing payments or, or or,
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  or other factors. So there's,
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  when you take a look at that wider range of financial activity,
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  you could start to see where the stresses are building before it actually
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  becomes manifest in a credit score or on your lending portfolio.
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  Thinking about those different ways,
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  I know there's you have a number of things that we've, you know,
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  incorporated that we study and it brought into our own
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  macro index. And I, when I'm looking at that, you know,
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  things that, you know,
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  that come to mind like capacity or assets are, you know,
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  examples, but when we think about like what are we looking at,
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  what have you found to be some of the most
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  interesting and relevant things that indicate consumer financial health as it
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  relates to each other?
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  Yeah. Especially recently with, with the,
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  the stresses that we've seen from rising prices and affordability being a,
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  a huge obstacle for a growing portion of the population,
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  really what it comes down to overwhelmingly is,
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  is access to liquid wealth, you know, savings, you know,
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  investments that can be drawn upon, not 401ks that are pretty,
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  pretty much tucked away, but things that when prices go up,
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  when emergencies come around, or even planned expenses that come in higher than,
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  than you had originally planned for being able to draw upon those savings,
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  those, those assets is huge. And,
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  we see that very starkly within the populations.
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  Those populations that have those assets that they can draw upon and have been
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  drawing upon over the last, you know, couple years they've been thriving,
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  they've been able to adjust to the rising prices and even grow
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  because they're seeing equity growth and, and their wealth,
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  you know grow accordingly. On the flip side,
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  those populations that don't have that, that financial safety net,
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  that ability to go back and draw upon, you know, resources when, when needed,
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  they've been struggling and we see that reflected in the data.
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  Yeah. Tom, I think you know, when you were talking about the, like,
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  the types and breadth of data,
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  it brings me back to the notion or idea of a balance sheet. You know,
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  if you think about the average household,
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  and you think about does this person you know,
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  have they paid their bills in in the past on, on time? You know,
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  that's a question I think we're all really good at answering you know,
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  in the risk management world with the data that we have.
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  But I think with the focus of Market Pulse Index, it's really,
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  does this person have that financial runway to survive the next economic shock?
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  And I think when you put that into the context of looking at the consumer
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  balance sheets, so looking at credit, looking at income, debt, assets, capacity,
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  et cetera, I think you get that notion of,
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  of what the value is really of a Market Pulse Index.
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  It's really getting that that specificity, you know, on a, on a household,
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  can they survive that next shock. And that's, that's really what we, you know,
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  that's what we do. , that's our, that's our job.
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  Thinking about it. There's of course, things that matter across the,
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  the different dimensions,
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  but liquid wealth the ability to generate income from a cash flow
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  perspective,
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  and essentially that allows someone to be able to cover their payments and have
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  favorable debt service ratios. Thanks for putting that into, you know,
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  some context,
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  especially when we think about we do talk about a lot of the various components,
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  but there are things that, you know,
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  definitely have a prioritization in terms of the ability to
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  you know, things or even move into the, you know, the term used was thriver Tom,
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  so, right. And I know that's one of our segments that we've been referencing.
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  Right. So kind of, you know,
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  changing gears a little bit you know, and I'm going to,
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  I was kind of latched onto
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  the analogy that that y'all were using about the, you know,
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  the temperature of the oven and yeah. Feeling just fine. So let's,
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  let's unpack the kha divergence. I know that's the words out there often,
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  and I know that that's one thing that's that you're often times talking and
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  thinking about Jesse, when are we not in a K? Are we in an E?
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  Are we in a B or are we in a Yeah, definitely you know,
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  whatever shape the economy might necessarily be. But some of the recent data,
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  you know,
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  shows that the national perspective on Market Pulse Index I think the
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  report at the end of the year was 61.6.
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  Maybe you can talk about where we currently are and
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  how things are, you know,
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  sitting from a stability perspective and specifically what the potential
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  illusion of the average could be.
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  Sure. Yeah. So I think we're, I think we're somewhere in the sixties,
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  you know mid 60, like 60 point,
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  you know six maybe is the latest number.
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  But you bring up a great point. I mean,
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  I think it implies that there's stability in the middle class, but,
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  you know, like Tom had said, you know, we talk about averages.
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  We love to joke about the averages whether we have our head in the,
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  the oven or not. But I think
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  the picture really then of like this macroeconomic stability,
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  it shows that there's kind of this calm surface, but there could be, you know,
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  more volatility behind the base.
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  And so I think when we look at that average of being 60,
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  it's being propped up by the top end of the k the,
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  the top arm of the k the one that we call thrivers, like.
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  10%.
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  A 10% popul population. Exactly. Yeah, exactly.
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  So those are consumers that are growing their wealth,
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  they're pulling the index upward, but at the same time,
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  you have this bottom arm of the K and that's sinking under the weight of this
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  persistent inflation and the high debt services,
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  it's really pulling that index down. So when you pull equally from both ends,
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  it's like the middle's not moving, but in reality, the middle's tearing,
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  you see this, you know, this divergence.
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  And so I think relying on that average right now, it's, you know,
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  probably a recipe for the suboptimal
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  business decision, really,
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  because nobody's actually living in that average you're either kind of on that
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  upward trajectory or that, that downward trajectory. Yeah.
• 15:43
  I think that last point you made is a particularly good one that we,
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  we rarely touch on, or at least we touch on less. We,
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  we talk about how the,
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  the average doesn't tell the full story,
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  but I think very closely related to that is that average
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  describes less and less of the actual population. And that's,
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  that's critical because that's that average quote unquote population
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  is where the financial lending industry has really
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  focused a lot of attention on, you know,
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  that middle class that that average consumer, well,
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  there's less and less of that average consumer. There's, there's more going up,
• 16:27
  there's more going down, and, you know,
• 16:30
  so that average actually describes less of the population and,
• 16:34
  and doesn't describe a growing portion of the population.
• 16:39
  Yeah. What I heard from the one liner there is we've seen a 1% drop,
• 16:44
  if I'm, if I got the overall stats correct from what Jesse was saying,
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  61.6 to 60.1, 60.9.
• 16:51
  Yeah. 6 61, 6 to 60.9, I think is the Yeah.
• 16:54
  Most recent. Yeah. 1% total drop. Yeah.
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  So I think that we've seen an expansion of the bottom ends. And what I'm,
• 16:59
  what I'm curious about then when we think about that, you know,
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  different angles of divergence and,
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  and the speed with with which things can either move down or up or even
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  even come back down on the upper ends. Because I think in our,
• 17:14
  in our last report you know, we were showing that the top 10%,
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  the thrivers grew by over 30%, and the, the middle,
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  you know, shrunk by 6% over 18 months.
• 17:27
  So when we think about that you know, Tom, I'm curious, like,
• 17:30
  do you think we're in a permanent polarization of American consumer
• 17:35
  finances?
• 17:36
  Yeah. So is the K permanent mm-hmm. Or are we,
• 17:40
  that's a fascinating question. It's actually one that's,
• 17:42
  that I've been thinking about a lot, you know, for a while now. And,
• 17:45
  and I did a bit of research, and by a lot of measures,
• 17:49
  you can go back all the way back to the 1970s and say that's,
• 17:53
  that's when the American middle class really reached its zenith. You know,
• 17:57
  that was, you know, that that was where, you know, the,
• 18:01
  the middle class was where the financial strength was.
• 18:03
  But starting in the eighties, we started to see that divergence start happening.
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  We started to see the growth, you know,
• 18:11
  of the both the populations that were
• 18:16
  thriving and, and those that were struggling.
• 18:19
  And off and on that's, that's been a pretty consistent, you know,
• 18:24
  pattern really for over 40 years now.
• 18:26
  What's been noteworthy in the last several years, starting with COVID,
• 18:32
  is the rate at which that, that divergence has, has grown.
• 18:37
  And that's why this, this structure, this,
• 18:41
  this phenomenon that's been happening for over 40 years now is really
• 18:46
  becoming a headline topic again. So permanent?
• 18:51
  I wouldn't say anything is, is permanent,
• 18:53
  but we are definitely in a very long term,
• 18:56
  you know phenomenon happening here. Yeah.
• 19:00
  I'm curious about things that are a pivoting and shifting about that.
• 19:03
  because I know you know,
• 19:05
  we oftentimes will think about like what makes up the thrivers,
• 19:09
  what makes up the, the thriver population?
• 19:12
  What are some of the things that potentially changed? So, Jesse,
• 19:15
  when I'm looking at that top 10%, the thrivers, what do you, what do you view,
• 19:20
  or what would you share as protecting them more right.
• 19:22
  Now? I would say, if we think of the, the analogy as protecting,
• 19:26
  then maybe I'll use the analogy of a shield.
• 19:29
  And so as we think of the thriver population
• 19:34
  in a high inflation environment, when you think of income, you know,
• 19:37
  income is definitely a shield. Let's make the analogy, it's made out of wood.
• 19:42
  You know, so it's, it's strong, but it may not be quite as strong as assets.
• 19:46
  And so assets are made out of, you know, some stronger metal, if you will.
• 19:50
  So if you only have high income,
• 19:52
  I think inflation can still erode that purchasing power,
• 19:56
  and it makes you feel squeezed.
• 19:58
  But when you think of having accumulated assets,
• 20:01
  you think of having home equity or market investments you're,
• 20:05
  you're more insulated. You know?
• 20:07
  So when you think of the 20 plus percent growth and the thriver tier,
• 20:12
  it's really fundamentally driven by an asset story. And so as we think of,
• 20:17
  you know, those, those, that population has a lot of home equity.
• 20:19
  They have fixed rate mortgages,
• 20:22
  they're actually benefiting as in as rates go up.
• 20:27
  You know, you think of the assets that they have that are fixed income derived.
• 20:31
  And so I think, you know,
• 20:32
  as the thrivers go to buy groceries or they pay for insurance,
• 20:36
  or they pay for anything else they're,
• 20:39
  they're solid in knowing that they have that net worth.
• 20:42
  They have that background, and I think that changes their consumption habits,
• 20:46
  and it changes their behavior much differently than somebody who doesn't have
• 20:50
  that asset or that shield to protect them.
• 20:53
  Jesse's on an analogy roll these days.
• 20:55
  I know, I know. . That's it. I'm done. .
• 20:58
  You're done. All right.
• 21:00
  No more. Can.
• 21:01
  I borrow a few until.
• 21:01
  Until the next topic comes along. Yeah. There you go. Yeah. But that's,
• 21:05
  I think that's really really helpful, especially when we look at like the,
• 21:10
  the key things that are, we, we talk about the k but you,
• 21:12
  you offered a bit of insight in terms of how the equity markets have been
• 21:17
  flowing and various bifurcation of even savings rates
• 21:22
  that the top end has been able to accumulate savings and equity
• 21:26
  which has really been a key driver there.
• 21:28
  Which of course we've talked about this often, is that, that will oftentimes,
• 21:33
  if the stock market's doing well, even if someone's not accessing it, they'll,
• 21:36
  they're more likely to go out to a nice dinner on Friday night.
• 21:39
  Absolutely. Yeah. And that's a big focus right now, because savings rates are,
• 21:42
  you know, historically low, you know, two, 3%. And that's a concern, obviously,
• 21:47
  you know, more, probably more so on the, the bottom end of the you know,
• 21:51
  low to middle income households. But certainly you know,
• 21:54
  it definitely does matter.
• 21:56
  Changing gears a little bit,
• 21:57
  I want to talk about the generational divide in the movements that we've
• 22:01
  observed there. Now,
• 22:02
  I don't know what your what your new grandchild's generation is,
• 22:07
  is going to be, or are they gen alpha or is it in the next one?
• 22:09
  I think we're in gen. Anyone born now is Gen Alpha, so, okay.
• 22:14
  I'll have to look that up to be sure. Well.
• 22:16
  But we do know that Gen Z is credit active,
• 22:19
  and they've been emerging in this space.
• 22:22
  In our last report we saw that Gen Z grew by a massive,
• 22:26
  when we talk about that top tier they grew by 74%. Now, some of that,
• 22:31
  of course could be size of the population or, you know,
• 22:34
  other potential things with respect to a lot of
• 22:39
  variability within that group as well.
• 22:42
  Maybe you can shed some light on why we think that the split seems
• 22:47
  to be more dramatic into the haves and haves nots,
• 22:49
  and what are some of the things behind that? Is it their careers?
• 22:52
  Is it other things? Like what are, yeah,
• 22:54
  what are some of the key drivers behind that growth that we've observed there?
• 22:58
  That.
• 22:58
  Is, that is so millennial, millennial of you to want to talk about Gen Z. So,
• 23:03
  but but I do agree. Gen Z is fascinating because they are,
• 23:06
  they are the up and coming financial generation. I mean,
• 23:10
  they're the generation of the future, not surprisingly. And you're right.
• 23:15
  There is a huge degree of variability within there,
• 23:18
  and a lot of that is what you would expect. Any, anytime that,
• 23:21
  that a a new generation comes of financial age,
• 23:24
  you're going to have a wide distribution of how they're starting those financial
• 23:29
  lives. Their incomes are going to vary widely, you know, the,
• 23:34
  the amount of, of of wealth that they have, you know,
• 23:38
  will, will start to grow rapidly or not grow at all.
• 23:42
  And so you'll see a lot of disparity or variability across generations that
• 23:47
  over time, when we look at previous generations,
• 23:50
  those that variability has tended to shrink. Yeah. And we see
• 23:56
  more, you know, confluence or around the mean.
• 23:59
  But but with Gen Z,
• 24:03
  they are in a bit of a unique situation. There is a lot, as you said, you know,
• 24:08
  a lot of growth on the top end of, of that generation as well as on,
• 24:12
  on the bottom end, more so than the other generations.
• 24:15
  And some of this is because some of them are,
• 24:18
  are walking into their financial lives in, in great shape.
• 24:23
  Other facets are in play as well, though, you know,
• 24:26
  some of them have access to family wealth.
• 24:29
  Some of them have very different situations at,
• 24:33
  at home and, you know, convenient, you know, safety nets, you know,
• 24:38
  that they can draw upon. So, so that's a,
• 24:42
  a different factor than we've typically seen in, in other in other generations.
• 24:47
  So it'll be interesting to see how that plays out over the years ahead.
• 24:50
  Yeah, that's really interesting, especially thinking the, you know,
• 24:54
  emerging careers, but also if, you know, if someone misses a bill, it is,
• 24:58
  it is helpful to have you know,
• 25:01
  a generational backing of some kind mm-hmm .
• 25:04
  Or at least in a neighborhood or some kind of community.
• 25:09
  Thinking, Tom, about what you were saying with respect to the Gen Z. You know,
• 25:14
  looking at the conference board data recently,
• 25:16
  I noticed that when you looked at generational breakout of that data,
• 25:20
  and it really tracks well to Market Pulse Index,
• 25:23
  but when you look at that that conference board data,
• 25:27
  it really showed that Gen Z specifically Gen Z and millennials both
• 25:32
  had some of the highest confidence in the economy,
• 25:34
  which it just runs counterintuitive to me to some extent.
• 25:38
  But I think as we were talking about it, it does make sense.
• 25:41
  You have that buffer. You, you have, even to some to some respect,
• 25:45
  gen ZI think having a little bit different fiscal discipline than maybe some of
• 25:49
  the other generations, even millennials, you know, compared to millennials.
• 25:53
  So kind of interesting to see that data.
• 25:56
  I know, I know it's, it's popular to, to rag on the,
• 25:59
  on the millennials and Gen Z, but as a firm, gen Xer,
• 26:02
  I like looking at the data and, and telling it as it is. And,
• 26:06
  and what I see there actually does give me a lot of confidence there.
• 26:10
  There's a lot of there are a lot of signs that,
• 26:14
  that say that Gen Z as a whole, obviously individuals are different,
• 26:18
  but as a whole, there,
• 26:20
  there's a lot of financial soundness as they approach the beginning of their
• 26:24
  financial lives. It's, it's encouraging on a lot. Now,
• 26:28
  I don't envy them the timing of, you know, they're entering financial lives.
• 26:32
  They have not, they have not chosen a good time, you know, to,
• 26:36
  to start careers and, and start trying to build wealth.
• 26:39
  But with what they have to deal with, they're,
• 26:42
  they're as a whole doing pretty well.
• 26:44
  In my, in my notes, I have four more things I want to talk about.
• 26:49
  So we can, we can count them down. I, you know, thinking about that, the,
• 26:54
  the younger generation,
• 26:55
  we know that there's not they're not the only generation that is in the market.
• 27:00
  And I, I know we, we still have not forgotten about the Gen Xers,
• 27:05
  Tom and I everyone does.
• 27:07
  I think I'm gracious that you classified me as a millennial,
• 27:10
  even though you know how old I am, .
• 27:14
  But when we think about the on the upper end I really liked how you shared
• 27:19
  about the, you know, some of the things we,
• 27:22
  you are observing in the data from like the seventies onward. And that's like,
• 27:25
  if you think about who is of age at the time to the, you know,
• 27:29
  boomers and traditionalists really having, you know,
• 27:32
  and we know that they do exhibit, you know, higher index scores on average,
• 27:35
  some of that is accumulated wealth.
• 27:37
  How much of that is potentially distorting the national average when we think
• 27:42
  about the other end of the of the, of the distribution? And now by distortion,
• 27:47
  that that doesn't necessarily mean that others may not catch up,
• 27:50
  but we know that, you know, things have changed over time.
• 27:52
  Yeah, absolutely. So I do think, you know to your point,
• 27:55
  we see with boomers and traditionalists,
• 27:57
  they have some of the highest Market Pulse Index values, you know, call it mid,
• 28:01
  you know, mid sixties, 64, 65.
• 28:04
  And I think when you realize that those two cohorts specifically hold some of
• 28:09
  the vast majority of the nation's housing equity,
• 28:12
  they have large wealth portfolios,
• 28:14
  you can see how that's going to distort the national average.
• 28:18
  They're largely immune to mortgage rates when you think of having houses that
• 28:23
  are either owned outright or fixed on lower rates,
• 28:27
  and then they also hold fixed income.
• 28:29
  And so you can see that higher yields are going to going to impact
• 28:34
  positively those fixed income assets that they hold.
• 28:37
  I think it really shows that there is a, you know, is a true impact to the,
• 28:41
  you know, to the average overall, and,
• 28:42
  and really a skew then as a result of that,
• 28:45
  when you look at the macro data at total spending
• 28:50
  or, you know, at a, at an aggregate level for financial health,
• 28:53
  I think it's skewed then by that older generation actively spending down those
• 28:57
  retirement assets as well. You know, so sort of depleting those assets.
• 29:01
  So I think there is somewhat of a false narrative then in terms of overall
• 29:05
  consumer health, when you think of, in, in the context,
• 29:07
  at least of what we're talking about with how boomers both accumulate assets and
• 29:12
  then how they spend those assets. Yeah.
• 29:14
  And I think part of part of that is something that we would see any
• 29:19
  time we have generations getting older,
• 29:21
  is you simply have time on your side and, and the ability to,
• 29:24
  to accumulate wealth OO over time for for a large portion of
• 29:29
  them. But I think one of the
• 29:33
  fascinating aspects about these particular generations that we're looking at
• 29:38
  is the potential for the,
• 29:39
  the wealth transfer that that is starting to be on everyone's minds. You know,
• 29:44
  as we, we look ahead and, and we start to see, okay, as,
• 29:48
  as the boomers and beyond, you know, continue to age out,
• 29:54
  how much of that wealth comes down to the younger generations,
• 29:57
  and what type of impact does that make that that we haven't seen
• 30:02
  before on, on a scale that we're looking at? So that's,
• 30:05
  that's going to be something that'll be very closely followed in, not,
• 30:08
  not the years ahead, even the months and quarters ahead.
• 30:12
  All right, you experts . What I want to,
• 30:16
  what I do then is we, we've been talking a lot about the macro stuff,
• 30:20
  about the trends, about you know, things that we've been observing in the data.
• 30:25
  But to come back to your analogy perspective you know,
• 30:29
  I'm in the Equifax advisors. I'm not a lender or a retailer,
• 30:33
  but imagine that I am and it, what, you know,
• 30:37
  when we think about that Jesse, maybe you can, you know, weigh in here and then,
• 30:42
  you know, I'd love your perspective too, Tom is I'm going to ask you,
• 30:47
  how do I find resilient consumers
• 30:52
  in the shrinking middle in particular, be it, because I, if I think about that,
• 30:56
  I tend to have a perspective on where the top end might be going,
• 30:59
  where the bottom end might be going. Now studying that middle is,
• 31:02
  is critically important, but how do I find them?
• 31:04
  Yeah, it's a great question. It's something we talk a lot with customers about.
• 31:08
  So I think we're in a golden opportunity right now.
• 31:11
  When you think of where lenders and retailers are right now,
• 31:15
  finding that that middle class is shrinking,
• 31:19
  you can't just paint the remaining middle with a broad brush.
• 31:23
  So if you rely solely on, let's say, traditional credit scores,
• 31:28
  you might see a consumer that's dropped 30 points,
• 31:31
  but it's because their credit card, US utilization ticked up. And,
• 31:35
  and that's due to inflation. And so risk models are going to say no,
• 31:39
  but if you look through the lens of something like Market Pulse Index,
• 31:42
  you're going to find that the consumer has stable verified income,
• 31:45
  they have strong employment capacity, they have significant home equity.
• 31:50
  And so that score dip is, is really, it dipped due to,
• 31:55
  you know, a short term cashflow management issue,
• 31:58
  but it's not a structural issue. And so I think that hidden risk is,
• 32:03
  is where the, the sweet spot is.
• 32:04
  It's really allowing lenders and businesses to find that resilient upward mobile
• 32:10
  consumer. And then you know,
• 32:12
  and then they take ad advantage of that pivoting middle, and they safe,
• 32:16
  they safely extend that credit or service to 'em.
• 32:19
  And I think that's the key,
• 32:21
  is really finding that hidden risk in that population,
• 32:24
  which is what we've really designed Market Pulse Index to do. And.
• 32:27
  I would say even the,
• 32:30
  you used the term traditional metrics Emmaline, when,
• 32:33
  when you were talking about that even,
• 32:35
  even those traditional metrics are changing to a degree.
• 32:39
  And, and an example that I use for that is, is simply the,
• 32:45
  the usage of time within there.
• 32:46
  Traditionally credit scores take take as an example,
• 32:51
  have been point in time, like, what does Tom O'Neill look like right now?
• 32:55
  What is his debt? What is his, you know, performance? You know, is he, you know,
• 32:59
  delinquent on anything? What are, what are the open lines of credit that he has?
• 33:03
  All of, all of those factors. But Jesse used a,
• 33:08
  a great example with, with rising prices,
• 33:10
  like I might have be in exactly the same strength of,
• 33:15
  you know, financial in,
• 33:18
  in my financial life as I was previously,
• 33:21
  but because the items that I'm buying are more expensive,
• 33:24
  my balances are going to be higher. I'm still paying it off each month.
• 33:28
  My fundamental situation has not changed,
• 33:32
  but the formula that model is going to see, oh,
• 33:35
  his average balance is now 1200 as opposed to a thousand dollars.
• 33:41
  And it'll weigh that according and, and my score would be impacted.
• 33:46
  And it's missing the point of the fact that, you know, yes, my,
• 33:49
  my balances have changed, but I'm still making those payments, my income,
• 33:54
  maybe you has changed. And so that's where, to Jesse's point, you know,
• 33:58
  looking beyond that and seeing these, these different facets are my savings,
• 34:02
  you know, dwindling, am I, you still able to,
• 34:05
  to meet my obligations without getting myself under financial stress?
• 34:09
  That's where the larger picture comes into view.
• 34:12
  So then to continue on that what I'd,
• 34:16
  what I'd be interested in thinking through is, say, for example,
• 34:22
  to be reactive or proactive is probably a thought that
• 34:27
  many lenders would have. It's, it's, what I would be thinking about is what,
• 34:30
  what are the activities I can do proactively?
• 34:32
  What are the things I can do reactively? And when we,
• 34:36
  when we think about that,
• 34:38
  I love how y'all were talking today about specifically like economic,
• 34:42
  taking an economic metric like inflation.
• 34:45
  How does that carry through to cash flow and then cash flow,
• 34:48
  how does that carry through to all the things that someone would be able to
• 34:52
  withstand any modification to that cash flow? So like,
• 34:57
  are there ways that someone can front run, you know,
• 35:00
  the idea of risk before a bigger, you know, I,
• 35:03
  I don't want to say like crisis necessarily, but if, if your portfolio,
• 35:07
  you know, starts performing poorly more poorly than you expected. Yeah.
• 35:12
  How, how could you be more proactive than reactive? Yeah. Yeah.
• 35:15
  Mm-Hmm . And, and we could stay on the,
• 35:18
  the Market Pulse Index topic for, for that matter. We,
• 35:21
  we used some examples earlier where, because that, that index is,
• 35:25
  is taking the more holistic view, it's going to catch things that,
• 35:29
  that a single credit score or some other type of risk score is,
• 35:34
  is not going to to necessarily account for.
• 35:37
  But more importantly in terms of actually taking action is
• 35:42
  it doesn't just tell you, Hey,
• 35:44
  there's more stress over here and less stress over there.
• 35:47
  It tells you why there's stress over here. So it's not, you know,
• 35:52
  this population we've seen have their,
• 35:56
  their average Market Pulse Index score decrease. Okay,
• 36:01
  that's interesting. You've got my attention. Why has it decreased?
• 36:04
  Is it because, you know,
• 36:07
  their incomes have been stagnant that they haven't been keeping up with the,
• 36:10
  the rising costs? Is it because
• 36:14
  they're taking on more revolving debt? Is it because, you know, their,
• 36:17
  their savings, their wealth and assets are, are taking a hit?
• 36:21
  The answer to those questions are what drives that
• 36:26
  proactive, those proactive actions that you can take. And, and because the,
• 36:31
  the index can say, here's why their,
• 36:35
  their overall score is being impacted,
• 36:38
  you could then pull upon the different data assets that,
• 36:42
  that Equifax and others offer to take that action and say, all right,
• 36:47
  let, let me zero in on, on this particular area that,
• 36:51
  that the Market Pulse Index helped identify.
• 36:53
  Since you two challenged me for another analogy.
• 36:57
  I think the fact that Market Pulse Index really switches from
• 37:02
  proactivity or switches from reactivity to proactivity.
• 37:06
  I think because we're looking at the intersection of debt
• 37:12
  capacity and assets, we're really spotting the mic, like kind of the micro,
• 37:16
  like, if you want to call it a fissure, it's,
• 37:18
  we're looking at the fissure more than the, you know,
• 37:21
  than the tectonic shift that's happening for the earthquake. You know,
• 37:25
  and I think that's the value there is really finding that that fissure that
• 37:29
  starts, and that's how lenders are going to, you know, use,
• 37:32
  is they're going to use this data proactively to find those small faults before
• 37:36
  it turns into a bigger issue.
• 37:39
  Okay. So I'm, I'm adding that to my list of Jesse analogy. So we've got oven,
• 37:43
  we've got shields, now we have earthquake.
• 37:46
  I'm on a roll. I'm on a roll .
• 37:49
  So I, I did see there's a lady bug that's walking across my window right here.
• 37:54
  And, and I know that there's a lot of symbolism around ladybugs,
• 37:57
  meaning like good fortune you know, luck protection, like all the things,
• 38:02
  right? You know, without you described. So what I'm curious about,
• 38:06
  especially with what I wanted to, you know, close out on with all of you is
• 38:13
  what do you,
• 38:14
  is your prediction on the US consumer over the next 12 to 18 months?
• 38:18
  And would you dare to venture? Oh.
• 38:20
  You're asking us to make predictions, , that's risky.
• 38:26
  We could, we could go all over the place with this, but let's,
• 38:28
  let's take that on. I, I think it all boils down to
• 38:33
  the health of the, the consumer. And that's, that's not earth shattering,
• 38:37
  that's not an einsteinian, you know, brainstorm right there. But,
• 38:41
  but it is the case. When we look out across the Macron environment,
• 38:46
  and we see what is going to make life,
• 38:50
  financial life easier or harder for the vast majority
• 38:55
  of, of individuals, that's where the focus needs to be.
• 38:59
  And so starting right off with, with, you know, the headlines of, of oil,
• 39:04
  you know, if that resolves itself, we, we know that,
• 39:09
  you know, even if there's an agreement that, that we're not going to have,
• 39:13
  you know, oil prices come back to what they were overnight.
• 39:16
  But if there's one scenario that, that,
• 39:21
  you know, the strait is opened, oil prices start coming back into, into play,
• 39:26
  supply chain quagmires start working in themselves out, and we, we see,
• 39:31
  we, we see the end of the tunnel, you know, in the, the near future. That's a,
• 39:36
  that's a healthy a healthy scenario.
• 39:41
  If that doesn't hold true , and we start to see, you know,
• 39:46
  consumers on a large scale be even more impacted than
• 39:51
  what they have been, then we're going to have a, a very different,
• 39:56
  you know Christmas in 2027 than,
• 40:00
  than perhaps we had in 2025.
• 40:02
  Yeah. And I think I'd add, since since Tom took the prediction part,
• 40:06
  maybe I'll just call out one potential hidden risk and one hidden opportunity,
• 40:11
  I'd say for a risk really looking at the remainder of the pivoting middle
• 40:15
  population. So again,
• 40:16
  that 70% of the population that we talked about with Market Pulse Index,
• 40:21
  understanding that those households have you know,
• 40:25
  they have challenges and so maintaining their lifestyle, they're using credit,
• 40:30
  they're using savings. So what happens with labor markets?
• 40:34
  Are they going to soften? If they soften?
• 40:36
  What does that do in terms of unemployment and, and the impact there?
• 40:40
  On the hidden opportunity side, I think looking at the upper arm, the thrivers,
• 40:45
  I know we talked about how that population is a smaller population segment,
• 40:50
  but it's also, you know, upwards of 50% of all spend,
• 40:53
  I think is what I saw in one statistic.
• 40:55
  And so really looking at that population and understanding
• 41:00
  how businesses and, and lenders how they market,
• 41:05
  how they leverage multidimensional data to,
• 41:08
  to identify opportunities in that space,
• 41:11
  I think it's going to mean that precision is a, is a,
• 41:14
  a critical need targeting that population.
• 41:17
  Well I loved how you answered my question on prediction with an
• 41:22
  it depends answer, .
• 41:24
  I mean, you have to know that we we're going to.
• 41:26
  We're.
• 41:27
  Always going to walk a tight line. I.
• 41:28
  Love it. Yeah, , but it's but it really does depend,
• 41:33
  and I think, so when I'm looking at this,
• 41:35
  I'm going to be examining the things that you described from economics
• 41:39
  understanding that economic policy, how things carry through to inflation,
• 41:42
  and then tracking all the things we've been talking about for cash flow on the
• 41:45
  top and bottom end of the market,
• 41:47
  and specifically where that middle class might be going.
• 41:50
  So that's all I want to know this time.
• 41:53
  And I definitely want to thank my panel Jesse Hardin and Tom
• 41:57
  O'Neill. There's a lot of information we covered.
• 42:00
  So thanks to Jesse and Tom for joining me today. And then to you, our listeners,
• 42:05
  I hope you really enjoyed our topic.
• 42:07
  If you have any other questions or suggestions for future podcasts,
• 42:12
  you can reach out to us@advisorsatequifax.com.
• 42:17
  We look forward to hearing from you.
• 42:18
  The information and opinions provided in this podcast are intended as general
• 42:22
  guidance only, and are subject to change without notice.
• 42:25
  The views presented during the podcast are those of the presenter as of the date
• 42:29
  this podcast has recorded and do not necessarily reflect official positions of
• 42:34
  Equifax,
• 42:36
  investor analysts should direct inquiries using the contact desk box on the
• 42:40
  investor relations section@equifax.com.