By Shelp Wealth Advisory Group
March 2024
We thought we would highlight the importance of consumers and the correlation to the economy and the markets. One of the basics in understanding the markets is that the consumer “drives” the economy. In fact, the consumer is the largest percent of GDP.
Consumer confidence refers to the sentiment consumers have regarding the economy's current state and its effect on their finances. It affects their willingness to spend. High confidence often leads to increased spending. Low confidence can indicate a pullback in spending and a potential economic downturn. Therefore, it’s helpful to monitor consumer confidence.
Take a look at the PDF enclosed from First Trust to get a glimpse of the balance sheets of the US consumer. What does it mean?
These indicators of home equity, household debt, and net worth give consumers confidence and therefore buying power. At this time the US economy is resilient despite aggressive rate hikes by the Fed. Maybe this is one reason why there is a perceived disconnect. However, reports are indicating that consumer credit card debt is increasing and FICA scores have declined a bit.
Of course, two consecutive quarters of negative indicates a recession. These numbers are not sympathetic to a recession at this time.
We thought this would be helpful as we monitor the markets and the Feds actions. The Fed recently gave an indication that they will keep rates steady at this time and commented that rate deceases may still be on the table or 2024
Stay tuned…
