Damn you gotta get up early to catch these stoushes. Damn "doderators!"
Well , we've been hearing this for 12 months or more, if it doesnt happen soon then its NDX to 20K! Then we'll call it a Superdufus Bubble. Investors fear the US consumer is about to hit a wall Reade Pickert and Vildana Hajric
Sep 11, 2023 – 4.10pm
More than half of 526 respondents in a Bloomberg survey said personal consumption – the most important driver of US economic growth – would shrink in early 2024, which would be the first quarterly decline since the onset of the pandemic.Another 21 per cent said the reversal would happen in the last quarter of this year, as high borrowing costs eat into household budgets. The findings are at odds with the optimism that has permeated the US sharemarket as cooling inflation and low unemployment bolstered hopes for a so-called soft landing. Should the economy stop growing it could mean more downside for stocks, which have already slipped from late-July highs.
“The likelihood of a soft landing, falling inflation, an end to [Federal Reserve] tightening, a peak in interest rates, a stable dollar, stable oil prices – all those things helped drive the market up,” said Alec Young, chief investment strategist at MAPsignals. “If the market loses confidence in that scenario, then stocks are vulnerable.”
Right now, the US economy appears to be speeding up rather than stalling. Growth is forecast to accelerate in the third quarter following a pickup in household spending, which jumped in July by the most in six months. But to some analysts, it looks a bit like a last hurrah.
“The big question is: Is this strength in consumption sustainable?” said Anna Wong, Bloomberg Economics’ chief US economist, who expects a recession to start by year-end.“It is not sustainable, because it’s driven by these one-off factors” – notably a summer splurge in the northern hemisphere on blockbuster movies and concert tours.
The enduring strength of the US job market has propped up household spending in the face of the biggest price increases in decades. It has led some analysts to push out their expectations for a recession, or even scrap them.
Economists at Goldman Sachs expect the consumer to outperform yet again in 2024 – and keep the economy growing – amid steady job growth and pay increases that beat inflation.
But there are plenty of headwinds looming. Researchers at the Federal Reserve Bank of San Francisco say the excess savings that have helped consumers get through the price spike will run out in the current quarter – a sentiment that three-quarters of the survey respondents agreed with. “There’s increasingly an issue where the lower end of the income and wealth spectrum is really struggling with the accumulated inflation of the last couple years,” while wealthier Americans are still cushioned by savings and asset appreciation, said Thomas Simons, Jefferies’ US economist. In the aggregate, consumers had been able to bend under the weight of higher prices, he said. “But there will come a point where that’s no longer feasible.”
Delinquency rates on credit cards and auto loans are rising, as households feel the financial squeeze after the Fed raised interest rates by more than 5 percentage points. And student loans are about to come due again for millions of Americans who benefited from the pandemic freeze on repayments.
Most investors in the survey pointed to the declining availability and soaring cost of credit, with mortgage rates near two-decade highs, as the biggest obstacle for consumers in the coming months. Three-quarters of respondents said auto or retail stocks were the most vulnerable to declining excess savings and tighter consumer credit that was not entirely priced in by the markets.
Since the economy’s fate hinges on what US consumers will do next, investors are looking in all kinds of places for the answer. Asked what they consider a good leading indicator, respondents pointed to everything from the most standard measures – such as retail sales or credit-card delinquencies – to airline bookings, pet adoptions and the use of buy now, pay later instalment plans.
“The traditional playbook for the economy and markets is challenging in this post-pandemic environment,” said Keith Lerner, co-chief investment officer at Truist Wealth. “Things are just taking longer to play out.”
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