(Kitco News) - Wall Street is experiencing renewed positive sentiment as President Donald Trump has stated that his administration is making progress on trade negotiations. However, much of the damage from higher tariffs may already be done, as one group reports a rise in financial distress among Main Street consumers.
LegalShield, a legal services company that provides Americans with access to legal advice, counsel, protection, and representation, released a report indicating that bankruptcy inquiries surged in the first quarter to their highest level since early 2020.
LegalShield added that the trend of rising financial distress on Main Street is further supported by its Consumer Legal Stress Index (CLSI), which has shown elevated consumer stress for nine consecutive months.
In an interview with Kitco News, Matt Layton, Senior Vice President of Consumer Analytics at LegalShield, said that although the stress index remains well below the highs seen in 2008, the increase in activity the firm has observed is concerning.
“This is hard data that shows folks are having problems; they're calling in today about issues they have right now. We're not measuring how anyone feels or their emotions or their thoughts—we're measuring the number of consumers who have a problem and are calling a lawyer because they need to solve it,” he said.
While the index doesn’t predict future economic trends, Layton said that the bankruptcy inquiries highlight the risk of worsening financial conditions.
"When you combine record debt, rising delinquencies, and prolonged financial stress—topped by price pressures driven by tariff uncertainty—the risk of a summer surge in bankruptcy filings becomes very real,” he said.
Layton noted that the firm’s bankruptcy inquiries typically translate into actual bankruptcies in about six months.
“You don't fall into bankruptcy overnight. It is a process. We believe the increases we're seeing in inquiries are going to lead to higher bankruptcy filings through the summer and into the fall,” he said.
Although gold prices have seen a sharp selloff this week as market sentiment has improved, analysts say that the growing threat of a recession will continue to support prices at elevated levels.
