Stocks fell on Friday as China hit back at the US with additional tariffs of between 5% and 10% on $75bn worth of imports. President Trump was swift to retaliate, announcing sweeping tariff hikes on nearly all Chinese goods. This latest escalation in the trade war is a worry for the stock market, after Q2 US corporate earnings had surprised to the upside, stemming some of the losses in equities.
Yield curve inversions have historically been accompanied by rising arrears. The increase in mortgage delinquencies (MBA) in Q2 was recently flagged up as a possible warning sign, but more comprehensive data on charge-off and delinquency rates on loans & leases at commercial banks have since been published by the Federal Reserve. These data are compiled from quarterly FFIEC Call Reports – filed by all commercial banks.
So far, during this record expansion, there has been no sign of a bottom in arrears. In fact, contrary to the MBA data, arrears in residential real estate loans fell again to 2.59%. Household mortgage debt as a share of GDP is the lowest since Q2 2001: the debt service ratio has plummeted.
The delinquency rate on all loan categories (all commercial banks) declined from 1.53% in Q1 to a record low of 1.50% in Q2, surpassing the previous nadir of 1.51% in H1 2006.
