Figuring Out Money: A Perfect Storm Is Brewing for 2025

Several economic indicators have soured in recent months, hidden behind the stock market’s strong returns. Consumers are starting to struggle, as seen by rising credit card balances and delinquencies.  

That’s at odds with expectations for the stock market to trend higher in 2025. While the market can trend higher, consumer spending is the lion’s share of the economy. If that’s in trouble, markets will likely struggle in 2025.

Part of the reason for struggling consumers? High interest rates. Since 2020, interest rates on credit cards have moved from 15% to over 20%. And even with the Federal Reserve cutting interest rates, the trend for credit card rates is on the rise.

That makes it more challenging for consumers carrying a balance on their credit cards to make their minimum payments. Over time, overly high rates can cascade out of control.

With rates rising, consumers look to longer-term loans to afford monthly payment costs. That’s leading to longer holding times for products such as automobiles. And a longer hold time can also reduce future spending.

While markets have been trending higher over the past two years, the past year has seen a rise even as unemployment has ticked higher, from 3.4% in early 2023 to 4.2% at the end of 2024.

Unemployment is still well under its historical average, for now. But a further trend higher bodes poorly for consumer spending as more and more find themselves out of work.

To see the full issues consumers are contending with as we enter 2025, click here.