What if a student-loan delinquency wave drags millions into subprime?
25% student-loan delinquency plus wage garnishment pushes 9M borrowers into deep subprime, draining discretionary income — the trade is short low-end discretionary retail (Dollar General, off-price, used autos) and wider consumer-ABS, HY the liquid read. Rhymes with the 2023 payment-restart squeeze on lower-income consumers, which dinged dollar stores and BNPL. Forward angle: garnishment is a direct, mechanical cash-flow hit unlike prior forbearance cycles, so the spending drag is more immediate and concentrated in the bottom income quintile.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. Record 25% delinquency and renewed wage garnishment drag 9M defaulted borrowers into deep subprime, hitting discretionary retail and consumer-ABS spreads. The trigger decomposes into signed root‑shocks — Consumer spending ▼ · Credit spreads ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | High-yield credit HYG 📈 chart | Rate | ▼ -0.4% hist -0.84–+0.05% · other way -0.16% (n=12) |
| 2 | Financials XLF 📈 chart | Equity | ▼ -0.4% hist -1.07–+0.2% · other way -0.09% (n=12) |
| 3 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -0.4% hist -5.09–+1.37% · other way +26.61% (n=12) |
| 4 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +0.3% hist -1.75–+3.86% · other way -3.49% (n=12) |
| 5 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.3% hist -0.98–+0.3% · other way -0.44% (n=12) |
| 6 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -0.3% hist -0.45–+0.02% · other way +0.35% (n=12) |
| 7 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.3% hist -6.16–+5.15% · other way +6.05% (n=11) |
| 8 | JPMorgan JPM 📈 chart | Equity | ▼ -0.2% hist -0.57–+0.05% · other way +1.78% (n=12) |
| 9 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -0.2% hist -18.0–+9.17% · other way -1.04% (n=11) |
| 10 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -0.2% model prior · unmeasured |
Probable recommendation
Why we may diverge from history
Trust the cascade short on MSTR/NDX: MSTR's +63%/+38% are March-2023 BTC-bull rallies during the bank panic, a swamped idiosyncratic driver absent in a student-loan delinquency consumer-credit shock.
Historical precedent — what analogous events actually did
Across 26 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| SOL SOL | SHORT | -17.7% · 5d -13.9% | 100% | 3 | 0.59 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.6% · 5d -0.1% | 68% | 19 | 0.31 | ✓ matches cascade |
| JPM JPM | SHORT | -0.4% · 5d -1.9% | 68% | 25 | 0.31 | ✓ matches cascade |
| MSTR MSTR | SHORT | -4.4% · 5d -3.6% | 64% | 22 | 0.21 | ✓ matches cascade |
| XLF XLF | SHORT | -0.8% · 5d -1.5% | 59% | 22 | 0.16 | ✓ matches cascade |
| Bitcoin BTC | SHORT | -6.4% · 5d -1.7% | 60% | 5 | 0.16 | ✓ matches cascade |
| 10y yield DGS10 | SHORT | -15bp · 5d -7bp | 58% | 26 | 0.14 | · |
| US dollar DXY | LONG | +0.5% · 5d +0.2% | 54% | 26 | 0.06 | · |
| Volatility VIX | LONG | +3.6% · 5d +1.4% | 48% | 23 | 0.00 | ✓ matches cascade |
| SPX SPX | SHORT | -0.8% · 5d -0.0% | 46% | 26 | 0.00 | ✓ matches cascade |
| NDX NDX | SHORT | -0.3% · 5d -1.8% | 42% | 24 | 0.00 | ✓ matches cascade |
| Gold XAU | LONG | +0.0% · 5d +0.1% | 50% | 22 | 0.00 | · |
Why this probability
Garnishment resumed and delinquencies climbing mid-2026; 25% record is reachable; developing trend. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.