US Equities Reach Record Highs Despite Growing Economic Risks

WASHINGTON - U.S. equities have climbed to record highs in recent months, with the Dow, S&P 500, and NASDAQ rallying despite growing economic risks beneath the surface.

However, the economic indicators are gradually exposing the economy's rotten core and the growing suffering of both households and businesses.

In their attempt to separate the reality from the hype, economists point out that the Dow, S&P 500, and NASDAQ record levels might be masking the actual economic situation, which is quite the opposite. Inflation decreases have been very attractive to investors, and lower interest-rate expectations have been very warmly received by the markets. Nonetheless, the financial situation of both consumers and businesses is getting worse. Among other reasons, the increase in debts and the decrease in the economy are causing people to worry about the future.

The U.S. bankruptcy trend has been going upward significantly in the second half of 2025, and thus it is moving in the opposite direction of the stock market’s record highs. According to the Administrative Office of the U.S. Courts, there were 557,376 bankruptcies last year ending September 30, which is 10.6% more than the year before and the highest level since 2020.

Business Bankruptcies: Grew by 5.6%, with the growth mainly attributable to the decline in the retail, casual dining, and service industries. Among others, Spirit Airlines, Claire’s jewelry stores, and First Brands have declared bankruptcy, thus, indicating that the issues of risky lending and worsening corporate health are still largely with us.

Personal Bankruptcies: Increased by 10.8%, as people had to deal with constantly increasing debt, high-interest rates, and the stopping of aid measures that were introduced during the pandemic. Most of the cases are in Chapter 7 and Chapter 13, which means that a large number of consumers are in financial distress.

Right now, the amount of bankruptcies is far from the peak of around 1.6 million that was the case during the financial crisis of 2008, but the steady upward movement since 2020 is a sign of growing pressure on the economy.

According to the American Bankruptcy Institute (ABI), bankruptcy filings in October have reached 53,019, which is 12% higher than the same period last year. There were rises in both individual (by 13%) and corporate (by 7%) filings, which suggest that economic problems of a broad nature are affecting both businesses and households.

According to S&P Global Market Intelligence, corporate bankruptcies are close to a 15-year high with 68 major failures recorded in the first ten months of the year, and 655 in total for the whole year. This is only one short of 2024 when the total was 687. The most affected industries are retail, dining, and the service sector, etc., which signal that these sectors have become more economically vulnerable.

The rise in personal bankruptcies is a reflection of the skyrocketing household debt that has been going up dramatically in the last couple of years:

• Credit Card Debt: Has reached $1.21 trillion, while the delinquency rate is 14.1%, and for low-income families, it is over 22%.
• Student Loans: Approximately 8% of federal student loans are in default after the end of the payment pause, and more than 5 million borrowers are over 90 days past due.

The environment of high-interest rates, increasing debt levels, and inflation, although at a lower rate than a year ago, are still with us and their combined impact is to worsen the situation of households. Most of the time, families are not able to make their monthly payments and at the same time, take care of any unforeseen expenses. Hence, the number of bankruptcies within this group is still increasing.

While stock markets are reaching new heights, the rise in bankruptcies is proof that there is a serious problem underneath the U.S. economy. Despite the fact that high debt levels, an increase in interest rates, and inflation are still making life difficult for households and businesses. Consequently, there is concern about financial instability occurring in the near future.

Market success makes policy-makers and consumers less aware of the fact that they are dealing with an increasingly fragile economic ​‍​‌‍​‍‌​‍​‌‍​‍‌​‍​‌‍​‍‌​‍​‌‍​‍‌​‍​‌‍​‍‌​‍​‌‍​‍‌landscape.