This week, our 3 Things are:<br>Resiliency. The U.S. economy has demonstrated that in spades. But is it sustainable?<br>Dimon on credit. Getting past the headlines.<br>Consumer trends. We identify three flying under the radar.

Resiliency, Dimon on Credit, Consumer Trends

Van Hesser's 3 Things in Credit - A KBRA Podcast

# Full Transcript

**Podcast:** Van Hesser's 3 Things in Credit - A KBRA Podcast

## Transcript

Welcome market participants to another 3 Things in Credit. I'm Van Hessers, Chief Market Strategist at KBRA. Each week we bring you 3 things impacting credit markets that we think you should know about. We are a week past the US jobs report and out of the usual avalanche of analysis, this bit, for me, stood out. Robert Armstrong, who pens the unhedged column for the FT, provided a summary of the last 10 US employment reports.

Bad, good, quite bad, quite good, very bad, good, bad, very good, very bad, very good. All the while, the unemployment rate bobbed around between 4.1 and 4.5%, with the latest result landing right between the two bookends. We are often puzzled by characterizations of the jobs report as the gold standard of data. As recovering corporate analysts, I just don't get it.

The monthly revisions are breathtaking, and don't get me started on the BLS's annual benchmark revisions. This week our 3 things are, 1. Resiliency. The US economy has demonstrated that in spades. But is it sustainable? 2. Diamond on Credit, getting past the headlines. 3. Consumer trends. We identify three flying under the radar. All right, let's dig a bit deeper.

Resiliency. The ability to withstand or recover from difficulties. The US economy has proven to have that. We often show a chart that shows the US's longest economic expansions, and the current one, the longest on record, is about to cross 17 years if we exclude March and April of 2020 at the outbreak of COVID. That's nearly double the next longest, which was 1991 to 2001. The current run has proven to be resilient.

Consider this. Consider this. In just the past six years, the economy has powered through a global pandemic, the highest inflation in 40 years, 550 basis points in rate hikes, the second, third, and fourth largest bank failures, heightened geopolitical tension, two hot wars, several energy shocks, and the highest tariffs in 100 years.

And through it all, the US economy continued to grow, 17% in real terms from Q3 2020 to Q4 2025, while stocks grew at an annual rate of 16%. So how did this happen? Well, we identify three drivers of growth. One, the highly productive public-private partnership between the federal government and our research universities that spur and fund innovation.

Two, the world's most effective capital markets. Decentralized and markets-based, the US financial system does two things really well. It funnels capital to its most productive use. From angel capital to the most conservative long-term investment, the financial system efficiently gathers investors across the risk spectrum. The second thing the system does is creative destruction.

It starves businesses with deficient business models and or capital structures, ridding the economy of damaging zombie companies. The third driver of growth? Debt. Public debt. Two bailouts, the GFC and COVID, have shot debt to GDP up t...

Resiliency, Dimon on Credit, Consumer Trends

Transcript

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Resiliency, Dimon on Credit, Consumer Trends

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.