Pretty Good Shape

Credit card issuers seem to agree that the consumer is in decent shape

Summary: Last week companies spoke at a variety of conferences. Among those Visa, Mastercard, and some other large credit card issuers all seemed to agree that the consumer is in decent shape and that the environment is stable. There's definitely slowing and low-income consumers are struggling but spend is still growing. All eyes are on the Fed this week.

---

Editor’s Note: We have reserved the sections after Macro for our premium subscribers. If you’re not a premium subscriber already, please consider subscribing.

---

Macro

Credit card companies say the consumer is in pretty good shape

"We believe that consumer spending remains healthy... if you compare the trends and what we saw in July and the trends, what we see in August, they are very consistent." – Mastercard (MA 0.00%↑) CEO Michael Miebach

"Quarter-to-date, things are looking generally stable with Q3, and that's in the U.S. and a number of major markets around the world. U.S. payment volumes quarter-to-date through August are up 5%, which is consistent with Q3." – Visa (V 0.00%↑) CFO Chris Suh

"We released Q2 earnings a few weeks ago, and the word that I used back then was stable. Stable in a slow-growth economy. Over the last six, seven weeks, nothing has really changed much." – American Express (AXP 0.00%↑) CFO Christophe Le Caillec

"The consumer is actually in pretty good shape. We can see their balances in their account. We can see on the loan side, delinquencies. And there's been no abrupt changes there. Losses like for credit cards have been in the 4% range for us or lower. That's about normal. So again, we don't see anything from the consumer that causes us to believe there are problems there." – Regions Financial (RF 0.00%↑) CFO David Jackson Turner

"When we look at the spend and we pulled this data, we don't see signs of stress in the consumer... When we look at spend on our cards for Walmart, Target, Costco, BJ's, we do not see any shifts in behavior." – Synchrony Financial (SYF 0.00%↑) CFO Brian J. Wenzel

"I think the consumer is in a reasonably strong shape, and it's been true for quite a while." – Capital One Financial (COF 0.00%↑) CFO Andrew M. Young

"I think most people are still doing pretty well, whether it's on the consumer side or the commercial side." – Wells Fargo (WFC 0.00%↑) CFO Mike Santomassimo

"From our vantage point, the US consumer is doing fine. I wouldn't qualify it as rolling in its spending government check, like nothing of that sort. I think it's fine. I don't think it's amazing. But I don't think it's weak. I don't think it's falling off a cliff." – Affirm (AFRM 0.00%↑) CEO Max Levchin

Low-income consumers are struggling but that's a small piece of the economy

"Folks on the lower side of the income or wealth spectrum are struggling more... you're starting to see higher delinquencies in that market. Not a huge piece of our business, but nonetheless, you're seeing some stress there." – Wells Fargo (WFC 0.00%↑) CFO Mike Santomassimo

Other consumers are starting to pull back too

"Higher interest rates and the effect of inflation are pressuring customers' ability to spend. This is especially true for our most budget-conscious customers, as we've been seeing for a while now, but we're now seeing other customer segments beginning to make changes as well... Customers are purchasing lower-priced cuts of meat, buying less and focusing on essentials." – The Kroger Co. (KR 0.00%↑) CEO Rodney McMullen"

I think when you move up the income ladder, we continue to see people pulling back on discretionary purchases, not in a troubled way, but just a pullback." – Synchrony Financial (SYF 0.00%↑) CFO Brian J. Wenzel

There's definitive slowing

"In real-time, what we're seeing across the industries in which we invest, software, IT services, leisure, travel, hospitality, industrials, the housing cycle is a definitive slowing in growth in the economy. And across all those industries. Companies have less pricing power. Consumers are beginning to push back on thousand-dollar hotel rooms and expensive flights. Even corporate IT spending, the rate of growth is beginning to decelerate." – Blackstone (BX 0.00%↑) Global Head of Private Equity Joe Baratta

But things are still stable

"What we see is that the US economy, even though we see some slowdown, is still doing okay, and the consumer is the main driver of that growth. So what we see is consumption is still there, and we have seen some change in behavior like discretionary consumption now stabilized, but it came down a bit, and non-discretionary is still growing at a slower pace but is growing." – JPMorgan Chase (JPM 0.00%↑) COO Daniel Pinto

"I'd say, broadly speaking, when you look at the economy, there's been a little bit of a slowing with the consumer on some fronts, but still the economy remains pretty durable." – Goldman Sachs (GS 0.00%↑) CEO David Solomon

Most people expect a soft landing

"We don't have a crystal ball about where this goes, but we are cautiously optimistic about a soft landing. Obviously, labor is the key and also our own inputs are -- when we -- our CEOs in June, basically only about 14% of them, when surveyed saw a recession in the next 12 months on the labor market side." – Blackstone (BX 0.00%↑) CFO Michael Chae

“Now we're all hopeful that the base case of the soft landing plays out, but we need to be prepared for other scenarios. And that's embedded in the way we've about the allowance” – Wells Fargo (WFC 0.00%↑) CFO Michael Santomassimo

Inflation is in the rear-view mirror

"And so, we believe and we're seeing in our portfolio, companies, inflation in the rearview mirror. The significant increase in input costs is down close to zero. Wages are continuing to grow, but at 3 or 4 percent, not the 6 - 7 percent. We're seeing rents come down across most of the real estate asset classes. And we don't see the inflation in our companies that the Fed is currently talking about. And we are seeing the US economy slowing and the European economy very slow." – Blackstone (BX 0.00%↑) Global Head of Private Equity Joe Baratta

The Fed is expected to cut rates this week
"We’ve made real progress on inflation. With the base rate at 2.5%, I think the Fed is comfortable enough to consider interest rate cuts as we head into the fall." – Goldman Sachs (GS 0.00%↑) CEO David Solomon

Will it be 25bps or 50bps?

"And I was on CNBC last week and someone said, well, what's your view on rate cuts. And I made the point that if you are going to cut 75 basis points between now and year-end, you're much better off cutting 50 basis points now because you'll spur more economic activity next year because corporations are making decisions about next year now. And if they know they have 50 basis points on a huge balance sheet of debt, they could do more hiring, they could do more investing even having that information." – SoFi Technologies (SOFI 0.00%↑) CEO Anthony Noto

100 bps could make a big difference

"People don't want to be the person that essentially invests at the peak of the rate cycle. We then have been asking, what would it take? What does the Fed need to do in order for you to be willing to invest. And the answer is I need to believe that the economy is going to hold up. And then generally, it's about 100 basis points in cuts is what we have been hearing, like 4.5% would reach a point where more projects pencil out, where there would be more confidence in making some of those investments." – Fifth Third Bancorp (FITB 0.00%↑) President Timothy N. Spence

Some people are worried the Fed won't cut enough

"I worry more that if the Fed doesn't start to meet the expectations, they read about in the paper of Fed cuts, they can actually disparate the consumer. So the consumer stabilized and came up a little bit I think, in anticipation that there will be a rate cut. So now the age starts to get to outer side." – Bank of America (BAC 0.00%↑) CEO Brian Moynihan

Others are concerned they'll cut too much
"I hope not. I'd rather personally. I tell the team this all the time. I'd rather have them not cut the rates. It's bad for our business. Do not cut the rates until you absolutely have killed inflation, leave no doubt because if it starts going up and down and so on and so forth, it anywhere like that period I just like the worst 10-year economic period in American history, except for the great depression. And you don't want that to happen. I'd rather hang on, and we're going to inflect no matter what. And we're kind of indifferent." – RH (RH 0.00%↑) CEO Gary G. Friedman

"So I think actually a fair case would be made that the Fed should stand put next week. I don't think that's going to happen, but I would make that case at most, it should cut by 25 basis points, and I hope that the Fed also cautions the markets that further cuts will be dependent on future inflation data. I hope Jay Powell at least walks back his highly dovish comments at Jackson Hole. Every hint of future cuts from the Fed will create exaggerated expectations by the markets, easing conditions before the Fed even acts. We've seen that over and over again. This is exactly what happened late last year when his dovish comments took market rates down, contributing, I believe, to a resurgence of inflation in the first quarter. His rate-cutting finger may be a bit itchy, but it's better to underpromise and overdeliver later on rate cuts." – Former FDIC Chair Sheila Bair

Stagflation would be a bad outcome

"The worst outcome is stagflation. And by the way, I wouldn't take it off the table." – JPMorgan Chase (JPM 0.00%↑) Jamie Dimon

International