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Is Household Spending Poised to Surge?

Is Household Spending Poised to Surge?

April 17, 2024

You’ve heard the expression, “A rising tide lifts all boats.” The same can be true for the financial markets. “A market rally creates wealth (and may help manage debt, too).”

As you can see in the first chart, U.S. households have seen total wealth increase by $13.5 trillion since the Fed, at its November 2023 meeting, said it was pivoting to a more accommodating monetary policy from a more restrictive approach. The stock market has led the way, but the bond market isn’t too far behind.1

At the same time, the second chart shows that household debt service payments as a percentage of disposable income continue to trend lower. The chart is through October 2023, asking, “How much of that $13.5 trillion will redirect toward managing household debt?”2

Remember, consumer spending accounts for roughly 70 percent of gross domestic product. So, a healthy consumer is critical to overall economic health. The double tailwinds of wealth creation and the improving debt position may indicate that the consumer will be in a strong position in the months ahead.

So, if you happen to see anything that questions the financial health of U.S. households, remember these two trends. At the very least, they show that household balance sheets are in a better position than they have been in some time.

1. ApolloAcadeny.com, March 29, 2024
2. Fred.StLouisFed.org, April 4, 2024