Despite Pres. Obama’s efforts to assuage fears of economic collapse, the stock market is taking a beating today ― already the Dow is below 11,000 and the Nasdaq has lost 6%. At the root of the freefall are Standard & Poor’s downgrades of U.S. long-term debt, Fannie Mae and Freddie Mac, and a handful of other financial institutions to AA+ from AAA.
Are we headed for a double-dip recession? What does this mean for auto finance?
The way I see it, the current economic turmoil is just another bump in a slightly longer road to recovery. Consumer confidence has been sour for years now; we were only minimally past the point that people were buying cars out of want, not need. So we may slip back into the need-based scenario a little longer, but I doubt 2011 vehicle sales will come in too much lower than anticipated.
As for loan performance, I think delinquency rates will remain pretty stable. Consumers are in much better financial positions these days, so even gyrating stock markets and an uncertain economy will do little to push them into default.
According to S&P, "the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge." Might things be back on the right track come Election Day?
What are your thoughts?