Dwight D Eisenhower proclaimed at one time, “We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.”
The lagging indicators in the economy are about to rear their ugly head and the false confidence in the economy may get worse before it’s getting better. As we look at all indicators, we see the largest drop in consumer spending of about 25% plus and consumer savings at almost 40% which is the largest increase in 39 years, when we had interest rates of 18% in the early1980’s.
As consumer spending increased pre-pandemic, we saw a driving economy, record numbers on Wall Street, and consumer confidence gearing up toward a GDP over 3%. Then the pandemic happened. People are not fully back to work and we still have over 30 million people who are unemployed with unemployment benefits ending July 31st, 2020, what will happen? We should not see consumer spending come back but rather stay at a standstill where you only see money spent on essential items.
Savings will increase more over time because people are only going to be smart and spend on what they need to stay afloat and in their homes. Investors will still go down the same path to see how things will unfold but will it be a slow death on the markets or will see something play out like someone quitting drinking “cold turkey” and we see everything fall out at the bottom of the barrel?
Although consumer spending grew in May to almost 10% as it compared to almost a 15 point loss in April, it looks great but is it really? The forecast still looks bleak for investors, businesses, and consumers unless we can find ways to pump more money into small businesses which makes up 50% of the employment in the U.S.
The increase we saw was because of states that re-opened which lend itself to more people going out after a three-month hiatus indoors so families got out and people bought items with their stimulus checks. With virus cases popping up in Arizona, Texas, and Florida we can now see a lockdown happening in these states which will then affect the overall health of the US economy with those states suffering from the spike in COVID-19.
The key thing in all of this is to find a reputable company that can guide you through all of this mess and helps you long term. Please click here to start or call us at 1-800-972-0786.