Credit scores falling at fastest pace since Great Recession, Q4 investment outlook

Market Trends - Markets are closing at record highs, with the Dow, S&P 500, and NASDAQ achieving their third consecutive record close [14][15]. - The investment outlook for the fourth quarter is optimistic, driven by AI advancements and anticipated Fed rate cuts [30][34]. Credit Scores - The average FICO score has decreased by two points to 715, marking the fastest decline since the Great Recession [2][3]. - The primary factor contributing to this decline is the reporting of student loan delinquencies, affecting approximately 6 million consumers [4][10]. - Despite the decline, the average FICO score remains over 10 points higher than pre-pandemic levels, indicating a bifurcation in credit scores across the population [6][7]. Auto Loans - Borrowers prioritize auto loans over other credit obligations, with the average FICO score for newly originated auto loans rising above 720 [12][13]. - Delinquency rates in the auto sector have stabilized, partly due to lenders tightening their underwriting standards [13]. Investment Strategies - Investors are encouraged to diversify their portfolios, particularly in quality bonds and sectors outside of technology, to mitigate risks and capitalize on growth opportunities [31][46]. - The focus on AI-related investments remains strong, with a recommendation to look beyond the US for better valuations, particularly in Chinese tech [42][43]. Economic Conditions - Economic data is expected to be volatile, with different sectors reacting variably to changes in the economic landscape [31][32]. - The Fed's interest rate forecasts show disagreement among members, contributing to market uncertainty [33].