Why are consumers so gloomy? 

Today’s 3rd quarter revised GDP numbers were raised from 4.9% to 5.3% causing the equity markets to rally early in the morning, bond prices to rally because the Fed signals rate increases might be over.

 Economy grew third quarter more than first estimated 

The inverted yield curve slope is declining although still inverted. We were discussing investing with a client this week and we described an environment as kind of a “Goldilocks” market environment. However, based on polls in regard to the economy, consumers do not seem to feel good about the economy. Especially younger Americans. Markets, on the other hand, seem to be bullish all the way around. Talk about main street vs. Wall Street! More current indicators hint at the torrid GDP growth rate of 5.2% slowing down in the final quarter and going forward to 2024 to closer to 2%.  The yield curve seems to be indicating this as well as the inverted yield curve begins to move with a smaller inversion and intermediate and long-term rates are in a steady decline.  Even though consumers continue to spend at a rapid rate-lagging indicator-forward looking indicators say slowdown. unhappy American consumers will welcome slower economy

The benefit of the slowdown is declining interest rates for housing/mortgages/car loans and the cost of borrowing in general however this also means the risk-free rate of return in US Treasury securities also is likely to decline. So why are consumers so gloomy? It could be the general state of the world.  War being a main drag. However, the gloom precedes both wars. Gas prices? Home prices? Inflation?  Here is a link to a NY Times recording to maybe help explain the cause at least among young people-but it’s complicated! 

New York Times - What's causing bad vibes in the economy

Holiday season is upon us.  Retailers, as always, are nervous about sales expectations. Now in regard to slowing inflation, which is good news, we have to remember that the earlier higher prices for goods and services were still much higher than before.  It is true that the rate of increase in those costs is slowing down significantly but they already rose previously.  Once prices rise do you remember any time they declined?  Maybe eggs?  As for the future of cost increases, the record labor settlement in the auto industry will definitely lead to higher auto prices because who else is going to pay except the consumer?

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