This podcast episode explores the trend of credit score migration in the U.S. and its potential impact on equities, fixed income, consumer health, and market performance. The speakers highlight the measurement problem in accurately assessing the health of consumers based on credit scores, as scores have been increasing over the past decade, particularly during the COVID-19 pandemic due to factors such as stimulus checks. They discuss the implications of credit score migration for fixed income and equity markets, including higher delinquency rates on consumer loans and the need to consider changes in credit scores in risk assessment models. Despite the high delinquency rates, economists expect consumers to remain resilient, driven by a strong labor market and elevated interest rates. The podcast also emphasizes the positive outlook for asset-backed securities (ABS) as credit score migration's impact on consumer performance lessens, with performance driven more by macroeconomic factors and lending standards.
