3 Things You Need to Know This Week | Consumer Credit, US Trade, Charitable Giving

Transcript

Paige Tyson:

Hello, and welcome to 3 Things You Need to Know this Week. This regular series helps you cut through the financial headlines and focus on what really matters for markets. For more market insights, subscribe to our YouTube channel or visit FisherInvestments.com. And with that, here are three things you need to know this week.

First, US consumer credit.

On Wednesday, investors get a look at consumer debt when the Federal Reserve releases the Total US Consumer Credit Report for August. Headlines often focus on how much debt Americans owe, but a larger headline debt balance doesn't automatically signal financial stress. That's because as the economy grows and incomes rise over time, it's perfectly normal for the total amount of debt outstanding to grow as well. What matters is whether household income, assets and cash holdings are keeping pace. Looking at the broader picture, US households appear to be in relatively strong financial shape. If you look at the recent past, it might seem like consumers are behaving recklessly, but context matters. During the pandemic, many households accumulated unusually large cash balances from a combination of government stimulus payments, reduced spending opportunities and higher savings rates. And since then, some of those measures have moved back towards more normal levels. That may look concerning, but much of what we've seen recently reflects normalization rather than financial deterioration. Household net worth has continued growing faster than liabilities, while household net debt or total debt minus cash holdings remains low by historical standards. Debt service payments as a percentage of disposable income also remains below pre-pandemic levels. Mortgages offer some useful context, too. While the average rate for new mortgages has risen to around 7%, most US homeowners locked in mortgages they took out years ago at lower rates. In fact, the average effective mortgage rate is around 4.3%. Now, none of this means consumers are immune to economic challenges. We know many households continue to feel pressure from higher prices and borrowing costs. But the broader data suggests consumers are generally in a stronger financial position than headline debt figures alone might imply. So as you review this week's consumer credit report, we encourage you to focus less on the size of borrowing and more on the overall health of household balance sheets. Right now, that bigger picture looks encouraging.

Next up, the US trade balance.

This week, the United States releases updated trade data for August. Many investors get caught up in whether the trade deficit widened or narrowed, but it's worth considering what these figures might actually be telling us about the economy. That could be hard to see at times, because deficit naturally sounds negative. It leads some to view a larger trade gap as evidence that the US is falling behind. But trade deficits aren't necessarily a sign of economic weakness. In many cases, they reflect the opposite. When the US economy is stronger than many of its trading partners, American consumers and businesses often have the confidence and financial resources to buy more goods, including imports. That demand can widen the trade deficit, which, somewhat counterintuitively, can point to economic strength and spending power. This report also arrives at an interesting moment for global trade. As we discussed in our Week in Review, the US and China recently announced an agreement affecting roughly $60 billion worth of goods. Meanwhile, countries continue pursuing new economic partnerships and trade relationships, including Canada's recent discussions with the European Union. These developments highlight an often overlooked reality: global commerce is highly adaptable. Trade relationships evolve as countries and businesses respond to new opportunities, shifting priorities and, yes, tariffs. For investors, we recommend looking beyond whether the trade deficit grows or shrinks this month. Viewing data through the lens of overall economic activity is more useful than focusing on whether a statistic labeled a "deficit" happens to tick up or down.

Finally, charitable giving.

The end of the year is approaching, so this can be a nice moment to think about any giving you have in mind and how it might fit into your broader financial plan. If it feels right for you, there are a few options worth knowing about. One idea some retirees explore is a qualified charitable distribution, or QCD. If you're age 70.5 or older, a QCD lets you transfer funds directly from an IRA to a qualified charitable organization. These distributions can also count towards all or part of your annual required minimum distribution, making them a potentially useful way to support a cause you care about while satisfying IRS requirements. Another option is a donor advised fund, which allows you to make a charitable contribution now while deciding later which organizations ultimately receive grants. Unlike a QCD, contributions don't count towards required minimum distributions, but the funds can remain invested indefinitely until you're ready to direct them. It's also worth remembering that charitable giving and personal gifting are different. For 2026, you can gift up to $19,000 per recipient under the federal annual gift tax exclusion. While these transfers aren't charitable contributions, they can be a meaningful way to support family and loved ones. Whatever approach makes sense for you, the bigger theme is planning ahead. Many of these strategies require coordination with custodians, advisors, and tax professionals. So if charitable giving is part of your plans this year, now may be a good time to start those conversations rather than waiting until year end deadlines arrive.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our market views, check out This Week in Review, released every Friday, or visit FisherInvestments.com. Thanks for watching, and don't forget to like and subscribe.