In June 2025, US consumer credit increased by $7.37 billion, which is higher than the expected $7.00 billion. The previous month’s number was adjusted to show an increase of $5.13 billion, revised up from $5.10 billion. Total outstanding consumer credit rose from $5,047.3 billion to $5,054.7 billion, an increase of $7.4 billion or 0.15%. However, revolving credit decreased from $1,298.1 billion to $1,297.0 billion, a drop of $1.1 billion or 0.08%.

Nonrevolving Credit Increase

On the other hand, nonrevolving credit grew from $3,749.2 billion to $3,757.6 billion, rising by $8.4 billion or 0.22%. This highlights changes in consumer credit habits, showing a clear distinction between revolving and nonrevolving credit. While the June consumer credit report may seem positive at first glance, the details reveal a more concerning situation. The decline in revolving credit by $1.1 billion, marking the first decrease in six months, is a significant red flag. It suggests that consumers are reducing their credit card spending and becoming more cautious with their finances. This trend aligns with recent retail sales data from July 2025, which showed a surprising 0.2% drop in spending at general merchandise stores. A similar pattern occurred in late 2022 when consumers tightened their budgets in response to high inflation. The increase in nonrevolving credit is primarily due to auto and student loans, which do not fully reflect the overall economic health.

Investment Opportunities Arising

In the coming weeks, this situation presents a chance to purchase puts on consumer discretionary ETFs. The market hasn’t fully accounted for a slowdown in this sector, and implied volatility is reasonable. We should aim for contracts expiring in September and October to take advantage of any potential earnings warnings. This consumer weakness also changes the outlook for Federal Reserve policy. The likelihood of another rate hike in 2025 has dropped significantly, and now the market is starting to expect a higher chance of a rate cut by the second quarter of 2026. This makes it sensible to position in interest rate futures for a more dovish Fed. Overall uncertainty is likely to rise, making broad market hedges a smart strategy. The CBOE Volatility Index (VIX) has been trading close to its 52-week lows, around 13.5. Buying VIX calls or inexpensive, out-of-the-money puts on the S&P 500 can offer affordable protection against a market beginning to react to this consumer slowdown. Create your live VT Markets account and start trading now.

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