Higher rates, the possibility of a trade war, and even the possibility of a REAL war are just some of the threats waiting to break the hearts of stock market investors.
And in order to save yourself, you must pay close attention to not only the obvious signs of trouble, but to those that are more subtle – but still revealing – as well. Like an abrupt slowdown in consumer spending.
Evidence suggests that consumer spending – a driver of 70 percent of all U.S. economic activity – is about to head off a cliff. Steen Jakobsen, the chief economist at Denmark’s Saxo Bank, sees a 30 percent drop in the stock market coming, and says “maxed out” consumer spending is one of the “tells” that a pounding is on the way.
“All the data we’ve seen over the last few weeks has basically been that the consumer is maxed out, we’ve seen that in credit card loans as well, so I think the consumer is done spending the money,” Jakobsen recently told CNBC.
At the root of the consumer spending roadblock is anemic wage growth, and it appears that to spend discretionarily, plenty of folks are willing to plunder their savings and go into debt.
Consumer Debt Rising to Unsustainable Levels
Saxo Bank’s Jakobsen mentioned problematic credit card loans, specifically, as one cue to the deterioration in consumer spending. Perhaps he had advance notice of JPMorgan’s recent announcement of Q1 earnings that revealed credit charge-offs there are on the rise. According to their data, bad credit card loans at JPM are up 18 percent year-over-year compared to Q1 2017.
And a March article at WalletHub shares little good news on the credit card front: Americans’ total level of credit card debt is now over $1 trillion for the first time in history, while the average balance per household is now $8,600, an amount WalletHub analysts deem unsustainable. Although WalletHub says charge-off rates remain at “historical lows,” recent numbers such as those posted by JPMorgan suggest the trend may be reversing. Plus, common sense dictates the change to a climate of higher interest rates doesn’t bode well for the future manageability of that debt.
Then there’s this: Household debt, overall, is up to dangerous levels. At the end of 2017, total U.S. household debt had reached $13.1 trillion, climbing for the fifth straight year. Many in the mainstream media seem dismissive of the increase, but once higher rates set in, families will find themselves suddenly overwhelmed by the debt they’re already struggling to manage.
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Prepare for the Market Downturn by Acquiring Physical Gold and Silver
The contraction in consumer spending is one more telling sign that trouble is headed this way. Is your portfolio protected? If you’re not sure, give Augusta Precious Metals a call at 855-976-5436, and speak with one of our retirement specialists about acquiring physical gold and silver for your IRA or 401(k). Gold and silver are among the only assets with the demonstrated capability to help portfolios not only survive, but thrive, during financial crises.
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Astute investors know it’s incumbent upon them to not only pay attention to the obvious problems facing the economy and stock market, but also to the cues that don’t always occupy space on the front page – like a slowdown in consumer spending. Don’t get blindsided when there’s a correction…or something much worse.