Finance

Wealthy consumers up spending while the rest of America cuts back

Published

3 weeks ago

April 28, 2025

Shoppers walk through the King of Prussia Mall, as global markets brace for a hit to trade and growth caused by U.S. President Donald Trump’s decision to impose import tariffs on dozens of countries, in King of Prussia, Pennsylvania, U.S., April 3, 2025.

Rachel Wisniewski | Reuters

America, at the start of 2025, is a tale of two consumers.

Lower-income earners are reining in their transactions to focus on essentials, while the wealthy continue to spend freely on perks including dining out and luxury travel, according to first-quarter results from U.S. credit card lenders.

As anxiety from the opening salvos of President Donald Trump‘s trade policies rippled through the country in recent months, investors and economists have wondered whether declines in consumer sentiment would spill into the real economy. There are some early signs of stress among those who are already more economically vulnerable.

For instance, at Synchrony, which provides store cards for retail brands including Lowe’s and T.J. Maxx, spending fell 4% in the first three months of the year, the company said last week.

That compares to a 6% spending jump at American Express and a similar rise at JPMorgan Chase, both of which cater to wealthier users with higher credit scores than Synchrony. AmEx said its customers spent 7% more on dining and 11% more on first class and business class airfare than a year earlier.

While the “consumer is still in pretty good shape” overall, they are “being selective around how they spend,” Synchrony CEO Brian Doubles told analysts on April 22.

Lower-income card users in particular “started tapering their spend about a year ago,” pulling back on discretionary and big ticket expenses as inflation ate into their buying power, Doubles said.

Falling behind

More Americans were already falling into debt while using their credit cards in the fourth quarter. The share of credit card users making only minimum monthly payments rose to 11.1%, the highest level in 12 years, according Federal Reserve Bank of Philadelphia data released this month.

But so far, credit card lenders catering to wealthier customers have been insulated from concerns about how tariffs, inflation and a possible recession later this year could impact consumer spending.

“It’s fair to say that the high end has held up better, and the low end has pulled back more,” Brian Foran, a Truist analyst covering banks, said in an email. “It’s been a common theme both speaking to credit card companies, and hearing from most of my colleagues covering consumer and retail.”

The split was also visible at Citigroup, a major player in the credit industry. While spending in the division that provides cards for retailers fell 5% in the quarter, plastic that carries the bank’s own brand — a cohort with higher credit scores — saw spending rise 3%.

Both Citigroup and Bread Financial, another provider of store and co-branded cards like Synchrony, said that consumer behavior shifted toward essentials and away from travel and entertainment on concern that tariffs would raise prices for some goods.

The dynamic boosts spending now, but it could mean weaker demand in the future.

“Consumers are buying more electronics, home furnishing, auto parts,” Bread CFO Perry Beberman said last week.

People are “trying to figure out, are they still going to buy that big TV or are they going to make some other choices if inflation comes through at some of the rates they could,” Beberman said. “That’s the real wildcard here.”

Finance

Chase CEO Jamie Dimon says markets are too complacent

Published

8 hours ago

May 19, 2025

Business Finance News

Jamie Dimon, CEO of JPMorgan Chase, leaves the U.S. Capitol after a meeting with Republican members of the Senate Banking, Housing and Urban Affairs Committee on the issue of de-banking on Feb. 13, 2025.

Tom Williams | Cq-roll Call, Inc. | Getty Images

JPMorgan Chase CEO Jamie Dimon said Monday that markets and central bankers underappreciate the risks created by record U.S. deficits, tariffs and international tensions.

Dimon, the veteran CEO and chairman of the biggest U.S. bank by assets, explained his worldview during his bank’s annual investor day meeting in New York. He said he believes the risks of higher inflation and even stagflation aren’t properly represented by stock market values, which have staged a comeback from lows in April.

“We have huge deficits; we have what I consider almost complacent central banks,” Dimon said. “You all think they can manage all this. I don’t think” they can, he said.

“My own view is people feel pretty good because you haven’t seen effective tariffs” yet, Dimon said. “The market came down 10%, [it’s] back up 10%; that’s an extraordinary amount of complacency.”

Dimon’s comments follow Moody’s rating agency downgrading the U.S. credit rating on Friday over concerns about the government’s growing debt burden. Markets have been whipsawed the past few months over worries that President Donald Trump‘s trade policies will raise inflation and slow the world’s largest economy.

Dimon said Monday that he believed Wall Street earnings estimates for S&P 500 companies, which have already declined in the first weeks of Trump’s trade policies, will fall further as companies pull or lower guidance amid the uncertainty.

In six months, those projections will fall to 0% earnings growth after starting the year at around 12%, Dimon said. If that were to happen, stocks prices will likely fall.

“I think earnings estimates will come down, which means PE will come down,” Dimon said, referring to the “price to earnings” ratio tracked closely by stock market analysts.

The odds of stagflation, “which is basically a recession with inflation,” are roughly double what the market thinks, Dimon added.

Separately, one of Dimon’s top deputies said that corporate clients are still in “wait-and-see” mode when it comes to acquisitions and other deals.

Investment banking revenue is headed for a “mid-teens” percentage decline in the second quarter compared with the year-earlier period, while trading revenue was trending higher by a “mid-to-high” single digit percentage, said Troy Rohrbaugh, a co-head of the firm’s commercial and investment bank.

On the ever-present question of Dimon’s timeline to hand over the CEO reins to one of his deputies, Dimon said that nothing changed from his guidance last year, when he said he would likely remain for less than five more years.

“If I’m here for four more years, and maybe two more” as executive chairman, Dimon said, “that’s a long time.”

Of all the executive presentations given Monday, consumer banking chief Marianne Lake had the longest speaking time at a full hour. She is considered a top successor candidate, especially after Chief Operating Officer Jennifer Piepszak said she would not be seeking the top job.

Finance

Stocks making the biggest moves midday: UNH, TSLA, BABA

Published

10 hours ago

May 19, 2025

Business Finance News

Finance

Klarna doubles losses in first quarter as IPO remains on hold

Published

14 hours ago

May 19, 2025

Business Finance News

Sebastian Siemiatkowski, CEO of Klarna, speaking at a fintech event in London on Monday, April 4, 2022.

Chris Ratcliffe | Bloomberg via Getty Images

Klarna saw its losses jump in the first quarter as the popular buy now, pay later firm applies the brakes on a hotly anticipated U.S. initial public offering.

The Swedish payments startup said its net loss for the first three months of 2025 totaled $99 million — significantly worse than the $47 million loss it reported a year ago. Klarna said this was due to several one-off costs related to depreciation, share-based payments and restructuring.

Revenues at the firm increased 13% year-over-year to $701 million. Klarna said it now has 100 million active users and 724,00 merchant partners globally.

It comes as Klarna remains in pause mode regarding a highly anticipated U.S. IPO that was at one stage set to value the SoftBank-backed company at over $15 billion.

Klarna put its IPO plans on hold last month due to market turbulence caused by President Donald Trump’s sweeping tariff plans. Online ticketing platform StubHub also put its IPO plans on ice.

Prior to the IPO delay, Klarna had been on a marketing blitz touting itself as an artificial intelligence-powered fintech. The company partnered up with ChatGPT maker OpenAI in 2023. A year later, Klarna used OpenAI technology to create an AI customer service assistant.

Last week, Klarna CEO Sebastian Siemiatkowski said the company was able to shrink its headcount by about 40%, in part due to investments in AI.