Will US Households Continue to Spend?
Investor concerns regarding the health of the consumer sector are becoming more widespread. However, my research leads to a more favorable conclusion, with a forecast of sustained growth in spending throughout this year. The most important variables in the outlook for private consumption are employment and wage and salary income, adjusted for inflation. Hiring remains healthy, and household income is increasing at a pace well in excess of the inflation rate.
Household balance sheets are extremely liquid and net worth has increased by more than 40% since 2020. Consumer credit remains unusually healthy considering the maturity of the expansion cycle and the steep rise in borrowing costs. Delinquencies and defaults are in a rising trend, but in most cases are still below pre-pandemic levels. A breakout in bond yields as expected later this year poses a serious threat to an equity market already in overvalued territory... READ MORE
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