Expect the unexpected
There is simply no way to gracefully “roll out” a pandemic. Such an unprecedented experience tends to be filled with unintended consequences. Due to the modification of human behavior, we might adapt to the expectation of the unexpected.
For example, the Federal Reserve Bank of New York reported that 59% of US households made a “major purchase” in the first four months of this year. A major purchase in this context is defined as an automobile, furniture and / or home repair. This is the highest percentage reported in 5 years. People are spending money.
On the other hand, the Commerce Department noted that the personal savings rate in the first quarter of this year was 21%. Compare that to the same figure in the first quarter of 2001: 5%. So what is going on here? There is a lot of money flowing through government stimulus checks. Plus, spending is more difficult when you’re scared and in lockdown mode. The pent-up demand we’ve been discussing for about a year now is rampant – some of it translating into spending, some still being hoarded, some getting invested.
All of this has the potential to deliver the positive economic results expected this year and into 2022. However, how long can we count on the consumer? Wolfe Research doubts the planned post-pandemic spending madness can continue for as long as we think. They note that most of the estimated $ 2 trillion excess savings Americans have accumulated is held by high-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 money. We’ll see, but for now, expect the unexpected.
Last week, we were reminded of the short-term volatility that accompanies economic recoveries. According to Nuveen Investments, the Bellwether S&P 500 stock index fell for the third time in 5 weeks. Meanwhile, the tech-savvy NASDAQ ended its 4-week losing streak by adding just 0.3%. Don’t worry, we’re told, first jobless claims fell for the 5th time in six weeks, hitting yet another record low in the recovery at 444,000. Stay tuned for the jobs report from May next week. In addition, the all-important Purchasing Manager Composite Index reached 68.1, which exceeded expectations. Good news for an ongoing recovery and potentially your investment account.
Last week my wife and I took a “research trip” to Fort Myers, Florida. We visited his brother and sister-in-law in their new home. You may remember that WalletHub ranked Fort Myers as the fastest growing city in the United States. You would need to see it to believe it! Hundreds of houses at various stages of completion. License plates everywhere (lots of New York!). Pleasant to observe positive economic development. I remembered Houston when Texas Eastern moved me there in the mid 1970s. Construction everywhere. Yes, the economy is booming in many places as the population shifts from New York and California to Florida and Texas. Of course, this change comes at a cost to the cities that are evacuated.
I also took my first plane flight since 2019. Wall-to-wall people in airports and crowded planes. America is on the move. We were happy to have been vaccinated and are encouraged by the incentives offered across the country to inspire others to get vaccinated. While the United States has made exciting progress, the pandemic remains the greatest immediate threat to your financial security. The death toll is now approaching 600,000. However, the proverbial light at the end of the tunnel is clearly visible.
The opinions expressed in this document are given for general information only and are not intended to provide specific advice or recommendations to an individual. To determine which investment (s) may be right for you, consult your financial advisor before investing. The economic forecasts presented in the presentation may not develop as expected and there can be no guarantee that the strategies promoted will be successful. The referenced performances are historical and do not guarantee future results. Not all indices are managed and cannot be invested directly. Investing involves risks, including loss of capital.
RFG Advisory and its investment advisor representatives do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon, for tax, legal or accounting advice. Please consult your own tax, legal and accountant for advice on these matters.
Visit us at www.williamsfa.com. Tommy Williams is a CERTIFIED FINANCIAL PLANNER ™ Professional at Williams Financial Advisors, LLC. Securities offered by registered representatives through private client services, FINRA / SIPC member. Advisory products and services offered by investment advisers through RFG Advisory, a registered investment advisor. RFG Advisory, Williams Financial Advisors, LLC and Private Client Services are unaffiliated entities. The branch is located at 6425 Youree Drive, Suite 180, Shreveport, LA 71105.