Robert Keiser, an analyst at Thompson Financial, told CNBC’s “Closing Bell” that troubles in the sub-prime mortgage sector aren’t spilling over into the rest of the economy and it’s therefore unlikely the Federal Reserve will be forced to cut interest rates.
“Right now, if you look at job creation, the downtick in the unemployment rate, and personal consumption is holding up,” he said Wednesday. “It’s hard to make the case that sub-prime (lending), a very small entity of the U.S. market, is going to create a contagion effect and the Fed will have to deal with it later on down the road.”
Keiser said the sub-prime sector is news because many companies built their business model on the belief that delinquencies in the sector would remain at historically low levels.
“Frankly, (those companies) are being stomped out of the trade right now,” he said.
But there’s almost certainly more trouble ahead in the sub-prime mortgage sector.
Cassandra Toroian, an analyst at Blue Rockefeller, said, “I think it’s going to get a lot uglier.”