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Advisor's Edge Highlights of the Month from Share Scoops!

Frequently Asked Question❓ 

How do politics affect the market?

Answer at the bottom of the newsletter

Millions of student loan borrowers will likely face higher payments soon.

Millions of student loan borrowers will likely face higher payments soon. A federal appeals court has blocked the Saving for a Valuable Education (SAVE) plan, a program that offered lower monthly payments and faster loan forgiveness. This comes after the Supreme Court blocked a broader student loan forgiveness plan in 2023. The SAVE plan was intended to help borrowers manage their debt, especially those with lower incomes, by making their monthly payments more affordable and offering faster forgiveness for some loans. For example, some people could have had payments as low as $0 per month, and some loans could have been forgiven after 10 years of payments. The court ruled that the Biden administration overstepped its authority in creating the SAVE plan, arguing that it was more akin to loan forgiveness than a repayment plan. Now, borrowers who were on the SAVE plan will likely see their monthly payments increase as they switch to other repayment options.

Borrowing costs will likely stay higher for longer.

Borrowing costs will likely stay higher for longer. The Federal Reserve is playing a waiting game when it comes to interest rates. According to the minutes from their January meeting, Fed officials want to see more evidence that inflation is coming down before they start lowering borrowing costs. They're particularly concerned about the potential for tariffs to drive up prices even further, which would make their job of controlling inflation harder. While they see some positive signs in the economy, they're not ready to make any big moves just yet. This means that interest rates, which affect everything from car loans to mortgages, will likely stay where they are for a while.

Americans are feeling the financial squeeze, with record-high credit card debt and rising delinquencies.

Americans are feeling the financial squeeze, with record-high credit card debt and rising delinquencies. Americans are borrowing more money than ever, with total household debt reaching a record $18.04 trillion at the end of 2024. The Federal Reserve Bank of New York's latest report on household debt and credit shows that total household debt reached a record $18.04 trillion at the end of 2024, with credit card balances jumping to a staggering $1.21 trillion. This increase is likely due to a combination of holiday spending and ongoing inflation.

More people are falling behind on their payments. While mortgage delinquencies remain relatively low, and the overall delinquency rate of 3.6% is still below pre-pandemic levels, there's a worrying trend in auto loans and credit cards. Specifically, the share of auto loans that transitioned into serious delinquency rose to the highest since 2010, and credit card serious delinquencies matched the highest since 2011. This suggests that more and more people are struggling to pay their bills on time, especially when it comes to their cars and credit cards.

Your Advisor's Edge Team

💡 Answer to the Question:

Government policy changes can move markets, particularly spending, regulation, or tax policy. However, most significant policy changes have an extended lead time with multiple revisions, and most proposed policies may never come to fruition, so markets rarely react to general political discourse. Uncertainty has the most considerable influence on markets. Investors hate too much variability in their projections. So election years typically have above-average volatility in the first three quarters but a positive average return in the fourth quarter, regardless of the outcome, simply because there's more clarity on potential policy.