I’m a big believer that in every supposedly negative situation, we can find opportunities to seize. For example, during the recession caused by the COVID-19 pandemic, economic growth slowed, but according to the Federal Reserve Bank of San Francisco, “Households rapidly accumulated unprecedented levels of excess savings,” which it defines as “the difference between actual savings and the pre-recession trend.”
Now, we see another situation that may provide opportunities. On August 16, 2023, the Federal Reserve Bank of San Francisco published an article showing that Americans have been quickly spending these excess savings, which may be set to be depleted during Q3 2023.
According to the Federal Reserve Bank of San Francisco, the reduction of excess savings has created “considerable uncertainty” in its outlook on household savings.
Sometimes, it can be helpful to seek the opinions of others who keep a close eye on financial news. Here’s how Brad Chastain, U.S. Money Reserve’s Director of Education, summarizes the findings by the Federal Reserve Bank of San Francisco:
“The Federal Reserve Bank of San Francisco estimates that Americans accumulated excess savings of $2.1 trillion by August 2021 [based on] pandemic-related fiscal support. That has been drawn down to less than $190 billion and could run out during the third (this) quarter. That’s a lot of spending that has helped support the economy over the last two years that is unlikely to be replaced.”
For its part, the bank didn’t speculate on how a loss of this economic support might impact the greater economy. But with many analysts already believing that a recession may occur sometime between now and the end of 2024, a lack of excess savings entering the economy may hasten or worsen that situation. But as I said before, this doesn’t have to be a bad thing—in fact, it could be a sign of great opportunity.
In every piece of “bad” news, opportunity exists.
For quite some time now, we’ve been hearing that the United States may be headed for another recession. Even with inflation coming down and our economy showing growth, predictions of a recession persist. On August 22, 2023, for example, Business Insider published an article titled “Wall Street is declaring victory too early—the U.S. is still headed for a recession.”
If this news of dwindling excess savings is another indicator flashing warning lights of uncertain economic times ahead, it presents us with an opportunity: the opportunity to act now and help protect our savings before the next market downturn. And there’s one place many Americans continue to turn to when faced with economic uncertainty: physical gold.
Physical gold has been recognized as a hedge against market uncertainty and volatility.
During the 2007–2009 Financial Crisis, the United States entered the longest and deepest economic downturn since the Great Depression. A quarter of U.S. households lost at least 75% of their net worth, driving many below the poverty line. Meanwhile, gold prices soared, reaching a then-all-time-high price in March 2008 of around $980/oz. Today, gold has increased even further, climbing as high as $2,023/oz. in May of this year.
Historically, gold has been used by millions of Americans as a financial hedge and a store of wealth in times of economic volatility. If household excess savings are dwindling, and if we’re currently headed for another one of these periods, now may be the time to add further protection to your portfolio in the form of physical gold or other precious metals. And don’t forget about your future—retirement accounts can also be at risk of suffering major setbacks during economic recessions. I encourage you to call us today and let us help you build a more balanced portfolio that may be better prepared for whatever comes next.