According to the National Bureau of Economic Research,“excess savings can be calculated by measuring the accumulated difference inactual de-annualized personal savings and the trend implied by data for theforty-eight months leading up to the first month of the 2020” and it, alongwith other data, is intended to predict the strength of the economy, given thatconsumer spending represents nearly seventy percent of Gross Domestic Product(GDP).
Up until now, the American consumer has showed remarkableresilience despite being negatively impacted by rising costs and we believethat the chart below goes a long way in explaining this strength. In addition, keep in mind that nearly fortypercent of American homeowners have no mortgage and, of those that do, nearlysixty-percent have fixed rates below four percent, another reason why the Fed’stight monetary policy is working with more of a lag than during previouseconomic cycles.
As is illustrated by the chart below, the Excess Savingsthat had been accumulated from the onset of the Pandemic, peaked at $2.1trillion in August 2021 and has since been depleted leaving many to wonder whatthe impact of this might be on economic activity.
In our opinion, expect a measurable, but modest slowdown in consumer spending that will become apparent as we approach the election. Whether or not the slowdown will be enough to warrant a Fed rate cut prior to the election remains in limbo.
“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
Copyright (c) 2024 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
