Did Consumers Just Blow Our Shot at a September Rate Cut?
Joe Hill|July 27, 2024
“Spend, Spend, Spend.”
That’s what we titled an article we published here just over a year ago.
In it, we bemoaned consumer spending gone wild… and the historic debt balance that came along with it.
Total household debt clocked in at $17.05 trillion.
Now, according to the latest numbers from the Federal Reserve Bank of New York, the number is up to $17.69 trillion.
Auto loans… student loans… credit card balances…
They’re all on the rise, despite borrowing costs being at multidecade highs.
The last time it was this expensive to borrow money, people were still doing the “Macarena.”
And yet… today’s consumer continues to spend, spend, spend.
In fact, consumer demand in the second quarter rose at the strongest pace in two years.
It’s good news for GDP, at least. The latest report – released on Thursday – shows that the economy grew 2.8% during the second quarter, smashing analysts’ expectation of 1.9%.
Shah discussed this possibility in his Monday Takeaways.
“A very much higher than expected print on GDP will probably disrupt markets a little bit,” he said.
Sure enough, the S&P and Nasdaq both tumbled in the wake of the news.
Investors are now left wondering whether our resilient economy could disrupt the Fed’s plan to start lowering rates.
Will stubborn consumers cause Jay Powell to push back that first, long-anticipated cut to October? November? Or… gulp… all the way to 2025?
It isn’t likely. But then again, as we’ve said, trying to predict the Fed’s next move is a fool’s errand.
We won’t have to wait long to hear what the group is thinking, at least. The next FOMC meeting takes place next week.
Regardless, here’s some good news…
Soaring consumer debt, rising inflation and interest rates sitting at 23-year highs have done little to stop markets from soaring.
Since last July, the S&P 500 has risen 19%. The Dow is up 14%. And the Nasdaq is up nearly 25%.
If recent history is any guide, steadfast investors should continue to be rewarded, despite volatility.
And the opportunities for short-term traders should continue to be abound as well.
We can’t wrangle consumer spending any more than we can climb inside Jay Powell’s head. But as Shah likes to say…
It doesn’t matter what happens next… there is ALWAYS a trade.
Note: Speaking of winning trades… we’ve just released a new presentation from Shah detailing the perfect play for August. It’s returned a 38% average gain… EVERY SINGLE AUGUST SINCE 2019. Click here ASAP to learn more.
