DoubleLine Briefing: The State of the U.S. Consumer Through the Lens of Asset-Backed Securities

Rhea-AI Summary

DoubleLine Portfolio Manager Andrew Hsu and ABS Trader Michael Fine have released a research paper titled 'The State of the U.S. Consumer Through the Lens of Asset-Backed Securities'. The study combines macroeconomic data with high-frequency asset-backed securities (ABS) data to analyze consumer behavior.

Key findings include:

• U.S. consumers show persistent resilience, likely due to a strong residential mortgage market, robust labor market, and pandemic-era savings.
• Potential risks exist, including depletion of savings, wage stagnation, rising unemployment, and high consumer prices.
• DoubleLine finds attractive relative value in select ABS consumer market areas.
• Prepayments, defaults, and loss severities remain within reasonable historical average moving bands.

Positive

• U.S. consumer resilience supported by strong residential mortgage market and robust labor market
• Attractive relative value opportunities in select ABS consumer market areas
• Prepayments, defaults, and loss severities within reasonable historical average ranges

Negative

• Potential risks include depletion of pandemic-era savings
• Wage stagnation and recent rise in unemployment
• Ongoing high consumer prices despite cooling inflation rates

TAMPA, Fla., Sept. 16, 2024 /PRNewswire/ -- In a new research paper combining macroeconomic data with high frequency asset-backed securities (ABS) data, DoubleLine Portfolio Manager Andrew Hsu and ABS Trader Michael Fine find a persistently resilient U.S. consumer.

The research paper, "The State of the U.S. Consumer Through the Lens of Asset-Backed Securities," can be accessed here: https://doubleline.com/wp-content/uploads/Consumer-ABS-and-the-US-Consumer_Hsu_Fine_September-2024.pdf 

Consumer resilience, Messrs. Hsu and Fine write, "is likely fueled by the strength of the residential mortgage market, a robust labor market and the excess savings accumulated during the pandemic." Notwithstanding that strength, they note that "potential risks to the consumer persist, including the depletion of these savings, wage stagnation, a recent rise in unemployment and ongoing high consumer prices, notwithstanding cooling in the year-over-year rate of inflation."

Amid that conjuncture of consumer resilience and economic risk, the authors report that DoubleLine continues "to find attractive relative value in select areas of the ABS consumer market. While prepayments, defaults and loss severities require close monitoring, they all remain within reasonable historical average moving bands."

Andrew Hsu, CFA, is a Portfolio Manager for the DoubleLine Total Return and ABS/Infrastructure Income strategies. Mr. Hsu is a permanent member of the Fixed Income Asset Allocation and Structured Products committees. Prior to that, he was responsible for analysis and trading of structured products, where his focus included residential RMBS and ABS transactions. Mr. Hsu's responsibilities have also included structuring and negotiating terms on new-issue transactions and forming strategic partnerships with issuing entities in order to participate in key transactions.

Michael Fine is a Trader on DoubleLine's ABS team. Previously, he was an Analyst on the Risk Management team focusing on credit research and trading. Prior to DoubleLine, Mr. Fine was with Western Asset Management as an Analyst performing structured credit research and providing portfolio analysis on multisector fixed-income portfolios. Prior to that, he was member of the Analytics team.

About DoubleLine

DoubleLine Capital LP is an investment adviser registered under the Investment Advisers Act of 1940. DoubleLine's offices can be reached by telephone at (813) 791-7333 or by email at info@doubleline.com. Media can reach DoubleLine by email at media@doubleline.com. DoubleLine® is a registered trademark of DoubleLine Capital LP.

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SOURCE DoubleLine

FAQ

What are the main factors contributing to U.S. consumer resilience according to DoubleLine's research?

According to DoubleLine's research, the main factors contributing to U.S. consumer resilience are the strength of the residential mortgage market, a robust labor market, and excess savings accumulated during the pandemic.

What potential risks to the U.S. consumer are identified in the DoubleLine report?

The DoubleLine report identifies several potential risks to the U.S. consumer, including the depletion of pandemic-era savings, wage stagnation, a recent rise in unemployment, and ongoing high consumer prices, despite cooling inflation rates.

How does DoubleLine view the current state of the ABS consumer market?

DoubleLine continues to find attractive relative value in select areas of the ABS consumer market. They note that prepayments, defaults, and loss severities require close monitoring but currently remain within reasonable historical average moving bands.

Who are the authors of the DoubleLine research paper on U.S. consumer behavior?

The authors of the DoubleLine research paper are Andrew Hsu, Portfolio Manager for the DoubleLine Total Return and ABS/Infrastructure Income strategies, and Michael Fine, a Trader on DoubleLine's ABS team.