Jasmine K. from San Diego, CA asks: Hi Mitch, I read some articles over the weekend about consumers falling behind on car payments and credit card bills, even those with high incomes. Student loan payments are also about to restart. Do you think this could be a bad sign for the economy and markets?
Mitch’s Response:
Thanks for writing, Jasmine. It’s true that delinquencies among high-income borrowers have ticked higher in recent quarters. According to data from the St. Louis Fed and credit scoring firms, credit card and auto loan delinquencies have risen nearly 20% over the past two years among Americans earning $150,000 or more. These aren’t isolated to subprime borrowers, either. Many are considered “prime” or “super prime.”
There are a few possible explanations. Some higher earners may have overextended themselves during the low-rate, high-spending period after the pandemic. Others may be affected by sector-specific job weakness, particularly in white-collar fields like tech or media, where hiring has cooled or layoffs have materialized. And a surprising number of households that look well-off on paper are still living paycheck to paycheck in high-cost cities.1
That said, I would not extrapolate these anecdotes into a macro-level warning sign. First, overall household debt remains in a healthy place. In Q1 2025, household debt stood at about 68% of U.S. GDP, down significantly from its 2008 peak of 98%. And as seen in the chart below, debt service (interest payments) and principal payments as a percent of income are also still at historically low levels. This is important, as it tells us how capable households are broadly of managing debt.
Source: Federal Reserve Bank of St. Louis2
Second, consumer spending has remained steady. In fact, some retailers are reporting stronger sales among higher-income shoppers who are choosing value over luxury. To me, this is not so much a story of consumers collapsing as it is a behavioral reset. After a few years of outsized spending and government support, households are recalibrating. People are more selective, more deal-oriented, and less impulsive. That’s not a red flag, in my view. It’s a natural consumer adjustment.
Some top earners are clearly feeling the pinch. But from an investment standpoint, I see this more as a behavioral cooling than a sign of imminent economic trouble. If anything, it reinforces how strong the broader consumer foundation is, even as sentiment turns cautious.
Disclosure
2 Fred Economic Data. June 12, 2025. https://fred.stlouisfed.org/series/BOGZ1FL010000346Q#
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