There is simply no way to gracefully “relax” a pandemic. Such an unprecedented experience is usually fraught with unintended consequences. Due to the change in human behavior, we should possibly prepare to expect the unexpected.
For example, the Federal Reserve Bank of New York reported that 59% of US households made a “big buy” in the first four months of this year. A large purchase in this context is defined as repairing an automobile, furniture, and / or home. This is the highest percentage in 5 years. People spend money.
On the other hand, the Commerce Department found that the personal savings rate was 21% in the first quarter of this year. Compare that to the same number in the first quarter of 2001: 5%. So what’s going on here? Thanks to the state economic reviews, a lot of money is flowing around. Also, spending is more difficult when you are scared and have been in lockdown mode. The pent-up demand that we have been talking about for about a year is being released – part of it leads to expenditure, part is still hoarded, part is invested.
All of this has the potential to deliver the expected positive economic results this year and through 2022. But how long can we count on the consumer? Wolfe Research doubts the expected post-pandemic spending pandemic can last as long as we believe. They find that the bulk of the estimated $ 2 trillion in excess savings Americans have built is held by higher-income households. Their propensity to spend is not as great as that of the majority of our population. This group has the luxury of sitting on cash. We will see, but for the time being we continue to expect the unexpected.
Last week was reminded of the short-term volatility that comes with the economic recovery. According to Nuveen Investments, the Bellwether S&P 500 stock index fell for the third time in 5 weeks. Meanwhile, tech-heavy NASDAQ ended its 4-week losing streak at just 0.3%. Don’t worry, initial jobless claims fell for the fifth time in six weeks, hitting another record low in recovery at 444,000. Look forward to next week’s May employment report. In addition, the key purchasing manager’s composite index hit 68.1, which exceeded expectations. Great news for continued recovery and possibly for your investment account.
Last week my wife and I went on an “exploration trip” to Fort Myers, Florida. We visited her brother and sister-in-law in their new home. You may recall that WalletHub ranked Fort Myers as the fastest growing city in the US. You’d have to see it to believe it! Hundreds of houses in various stages of completion. License plates from everywhere (a lot of New York!). Nice to see positive economic development. I was reminded of Houston when Texas Eastern moved me there in the mid 1970s. Build anywhere. Yes, the economy is booming in many places as the population shifts from New York and California to Florida and Texas. Of course, this shift will cost the cities that will be vacated.
I’ve also made my first airplane flight since 2019. Wall to wall people at airports and packed planes. America is on the move. We were happy to have been vaccinated and encouraged by the nationwide incentives to inspire others to take their pictures. While the US has made exciting strides, the pandemic remains its greatest immediate threat to your financial security. The number of deaths is now approaching 600,000. However, the proverbial light at the end of the tunnel is clearly visible.
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Visit us at www.williamsfa.com. Tommy Williams is a CERTIFIED FINANCIAL PLANNER ™ Professional at Williams Financial Advisors, LLC. Securities offered by registered agents through Private Client Services, member FINRA / SIPC. Advisory products and services offered by investment advisory agents through RFG Advisory, a registered investment advisor. RFG Advisory, Williams Financial Advisors, LLC and Private Client Services are not affiliates. The office is located at 6425 Youree Drive, Suite 180, Shreveport, LA 71105.