Consumer spending is one of the main drivers of our economy, but inflation and higher interest rates seem to be taking their toll. And while this may sound like exactly what the Federal Reserve is hoping for—less consumers borrowing and spending to help slow inflation—Americans are also reportedly starting to fall behind on payments and aren’t able to put as much away for a rainy day.
When I see this kind of information come across my news feed, I immediately begin looking for opportunities. If consumers are spending and saving less, what might that mean for our economy as a whole, and what can we—the same consumers—do to help protect our financial futures?
According to an October 18, 2023, article by Fortune, consumers have “run out of steam.”
According to Fortune, Bank of America analysts warned that Federal Reserve policies of increased interest rates “would push consumers to the ‘point of pain’ in order to tame inflation.” And according to Brian Moynihan, Bank of America’s CEO, we’ve reached that point, with consumer behavior pointing to a “low-growth, low-inflation economy.” Specifically, Moynihan points to consumer spending, which he says grew by 10% from 2021 to 2022, but is currently only growing at a rate of 4.5%.
Moynihan also says he agrees with Citigroup CEO Jane Fraser, who has said that “cracks” are beginning to show in the spending habits of consumers—especially those with lower incomes.
An October 24, 2023, article by Fox Business provides further evidence of these “cracks,” stating that “a growing number of Americans are falling behind on their car payments, an ominous sign of the U.S. economy as high auto prices and stubborn inflation strain household budgets.”
The following day, on October 25, 2023, CNBC reported, “It’s becoming increasingly difficult for Americans to set money aside,” quoting a report by Bankrate that shows 81% of adults did not contribute to emergency savings in 2023, and 60% feel behind when it comes to setting aside emergency cash.
Several of these reports point to Americans running out of their surplus savings built up during the COVID-19 pandemic, thus losing their financial cushion.
While many middle- and lower-income Americans are forced to cut back on spending, wealthier Americans are also reportedly moving money out of their spending accounts.
According to Greg McBride, Bankrate’s chief financial analyst, “Cutting household expenses in a meaningful way may not be feasible with the run-up in prices for mainstay items such as shelter, food, and energy over the past couple of years.” So, for many Americans, the answer to higher consumer prices may simply be increased credit card or other debt.
Meanwhile, those in higher-income households are also pulling back their spending, with Fortune reporting that wealthier Americans are moving money out of checking accounts and into assets that may have greater growth potential.
If it looks like the economy will continue to slow down, one of the first questions I want to answer is whether it will be a long- or short-term trend. Fox Business may have answered that question, stating, “Rates are expected to remain elevated as the Federal Reserve has hinted that it may hold interest rates at peak levels for longer than previously anticipated.”
Armed with this information, we can now take time to look for opportunities. What can we do to help protect our wealth if America is facing a slowing economy, rising debt, and increasing consumer prices?
Physical gold has helped many of America’s wealthiest families protect their holdings over the long term.
In the years since the United States went off the gold standard, gold’s price has soared. As a physical asset and store of wealth, gold has helped millions of Americans weather economic volatility, recessions, geopolitical conflict, and more.
As a parent and a student of the financial world, I like to take a long-term look at my portfolio. I’m not just saving for myself or my retirement, but for my children and their children as well. That’s why I always look for growth opportunities in headlines that, for others, may seem negative. If, for example, many Americans are having trouble setting cash aside and paying their loans on time, and one of the factors affecting that situation—higher interest rates—is expected to continue for some time, this may be a sign that our economy is headed for slower or even negative growth, and that may mean an opportunity for gold.
Gold prices are already hovering near the $2,000/oz. mark, supported by continued geopolitical and economic uncertainty. If the precious metal is being primed for yet another run at its all-time high price following its previous rally in May of this year, NOW may be the time to take a greater position in gold.
