UnusualWhales

More borrowers with excellent credit have begun falling behind on their payments—a potential warning sign for the U.S. economy under President Donald Trump.

According to the New York Federal Reserve’s latest quarterly snapshot of household credit, there was a rise in serious delinquencies on auto loans, credit cards, and home-equity lines of credit at the end of 2024.

Monthly data points to a worsening trend for high-credit borrowers since Trump took office in late January. The financial health of top earners is becoming increasingly critical, especially as Trump’s tariff battle threatens supply chains and market volatility weighs on investor confidence.

As shown in the first chart below, the rate of seriously delinquent auto loans among prime borrowers reached its highest point since the 2020 pandemic in April, based on Intex data analyzed by MarketWatch. These loans, bundled into bonds, were more than 120 days overdue.

Delinquencies among prime auto borrowers are clearly on the rise.

The second chart reveals that loans at least 60 days past due have returned to prepandemic levels, despite the U.S. unemployment rate remaining relatively low at 4.2% in March.

Though not yet a full-blown crisis, the increase in delinquencies has raised red flags on Wall Street, especially as U.S. equities face renewed instability and the country’s most financially secure consumers play an outsized role in economic performance.

“Consumers are a key element because they do drive the U.S. economy,” said Andrew Hsu, a portfolio manager at DoubleLine. “For the past 10–12 months, the prime consumer has really been propping up the economy, largely because they’ve continued spending.”

Prime Trouble

In the 2007–08 financial crisis, it was subprime borrowers and toxic mortgages that triggered global upheaval. This time, however, investors are increasingly concerned about weaknesses among prime borrowers—typically those with credit scores between 660 and 719—posing new risks to economic stability.

A recent retail sales report indicated that some consumers may be front-loading purchases ahead of Trump’s tariffs, yet many prime borrowers were already showing signs of distress in managing auto loans and other credit obligations.

“We see this in real time,” said Hsu. “We see it every single month—things are deteriorating.”

Read more: Parents are ‘hunkering down financially’ to brace for Trump tariff impact

The U.S. economy has grown more reliant on the top 10% of earners, who now drive half of all consumer spending.

While the stock market isn’t the economy, it has a major impact on how Americans perceive their financial well-being—a perception amplified in recent years by surging home values and a booming equity market.

The chart below highlights the vast accumulation of wealth by the richest 10%, who have benefited the most from stock and mutual fund gains since the pandemic.