Attitude of Gratitude

Question: What are your thoughts as we head into the 2023 holiday shopping season? 

Answer: There is an optimistic attitude for the consumer this holiday season for at least six reasons. 1) The U.S. economy has added nearly two million jobs over the last six months. 2) Inflation does continue to outpace wages on a year-over-year basis; consumers have experienced positive real wage gains for five consecutive months. 3) Mortgage rates are showing signs of declining which helps consumers and the housing market. 4) While gasoline prices had risen to the highest level on record in June, gas prices have fallen $1.77 since the peak and are at the lowest level since October 2021. 5) The cost-of-living adjustment (COLA) for social security fixed-income recipients rose 8.7% in 2023 and should provide a boost, particularly as inflation is moderating. COLA payments rose at the fastest pace since 1981 when they were up 8.7%. 6) U.S. consumers still have excess savings, although it is beginning to wane, it will help consumers over the coming months. 

However, caution and moderation are warranted. The personal savings rate is currently 3.9% at the lowest level year-to-date and below the 30-year historical average of 5.9%. The higher mortgage, auto and credit card rates weigh on consumers and interest-rate sensitive sectors as well as on overall consumer spending. According to a recent Deloitte survey, 48% of consumers who have to repay student loans plan to adjust by cutting back on holiday spending. The rate of job growth is slowing which will impact discretionary spending. Lastly, the 2024 COLA increase will slow dramatically to 3.2%. 

Last year we saw increased promotional activity and sales as retailers looked to sell off inventories. This year we may see incentives to try to overcome expected weaker demand. 

We also need to consider consumer sentiment with our national debt increasing along with higher interest costs. 

Three more reasons for optimism include the fact that 1) the Fed is nearing the end of its tightening cycle. 2) Interest rates will likely move lower from here. 3) It’s always darkest before the dawn, meaning that depressed sentiment is a contrarian signal. 

As investors there is much to be thankful for this year

1. We live in the United States and have a resilient, dynamic economy. 

2. The US boasts record employment. 

3. Inflation is cooling off from multi-year highs.

4. Fed is closer to the end of the tightening cycle.

5. Higher yields available for income-oriented investors.

6. Above average equity market returns for 2023.

7. Mega-Cap names boosted returns with advancements in technology.

8. The ability to travel, and a stronger dollar made international travel less expensive.

9. Transportation costs moderating, making it more affordable to be with family and friends. 

10. Gratitude for the ability to spend that time with family and friends during the Holidays. 

The past few months have been extremely volatile. It is unnerving, but history shows that some of the best days in the markets often follow the worst days. That’s why it makes sense to create and monitor a unique plan that matches your risk appetite and cash flow needs. 

Research confirms that those who practice gratitude can experience greater well-being. We’re thankful and grateful for our readers and wish you a wonderful Thanksgiving and Holiday Season! Stay focused and plan accordingly.