Allow me to pull back the curtain and give you a snippet into how the consumer is trending right now.
US households are in excellent shape, the ratio of liabilities to net wealth has declined 50% since the GFC, and household leverage is currently at levels last seen in the early 1980s. See the chart below.
Although debt has been rising, it's the equity component that has been rising even faster, which has resulted in consumers being in such a good position.
Yes but, the personal savings rate has plummeted in the US to levels not seen since 2013 (see chart below). Although, we have seen a little kick-up since bottoming out in June of 2022.
What's been propping up this economy is the solid job numbers. The unemployment rate in the US is 3.4% right now (see chart below). You need to go back to 1968 to see these kinds of numbers.
If the unemployment rate rises, consumer spending will slow down, but the starting point for US households is very strong. What helps solidify this base for consumers is the following:
More than half of mortgages (54%) originated in 2020 of after. See the chart below.
And about 65% of mortgages are at rates below 4% pa., which are locked in for 30 years.
The consumer is doing just fine (for now), and they're the best place they've been for a really long time.
Jonathan Sim and I discuss more of what is going on in financial markets in last week's The Wide Lens Podcast.