📈 Household Net Wealth Hit Another All-Time High, Now What?
The strength of consumer spending and household balance sheets has been a bright spot in an otherwise challenging market and economic environment. These factors have helped to keep the economy out of recession and have bolstered corporate earnings, but they have also kept inflation hotter than the Fed might otherwise like, resulting in higher interest rates. What should investors know about the state of consumer finances as market and economic uncertainty continues?
We discuss in this episode of The Wealth Effect Podcast:
📈 Household Net Worth
💸 Consumer Spending Rates
📉 Personal Savings Rates
Matt Faubion, CFP®
Founder - Wealth Manager
Show notes and charts:
Household net worth has reached a new record level
Retail sales have picked up
Personal savings have declined after a sharp uptick
Historically speaking, this dynamic is why a decline in savings rates precedes many recessions as households over-consume, which drives the savings rate down and boosts economic growth. When consumers rein in their spending to more sustainable levels to shore up their cash flow and balance sheets, savings rates increase, and that impact is a negative impulse to economic growth.
The bottom line: Household net worth has returned to historic highs this year as markets have risen and the economy has been stronger than expected. However, moving forward, the American consumer faces significant headwinds that may hinder their ability to remain the supportive force they have been to the economy.
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