The US economy is still impressive.
And we believe there is a clear-cut, foundational narrative that explains why we are in the position we are in as of July 2023.
Consumer sentiment has improved recently, according to Liz Young, head of investment strategy at SoFi, who spoke to Yahoo Finance Live on Tuesday. “The market is up, inflation is down, and they still have a job.”
The labour market is the foundation of any economic growth. Furthermore, the US labour market is still expanding and unemployment is still at historically low levels.
Furthermore, despite the fact that food and petrol prices, which might be more unpredictable, are often excluded from inflation measurements by economists, these two expenses have a significant impact on household budgets.
Food prices increased 5.7% over the previous year in May, which is a moderate increase from the 10.1% increase recorded at the beginning of the year. Energy prices were down 16.7% year over year.
All of this has increased consumer sentiment, which was close to reaching a two-year high in the University of Michigan’s sentiment measure from last week.
And as the economy continues to grow, the stock market has refuted the general belief at the beginning of 2023 that the US equities market will have another rocky year.
In response, strategists and analysts on Wall Street have increased their predictions for stocks this year.
And it’s difficult to believe your doubts about the American customer.
Retail sales figures for June came in slightly below expectations, but updates to May’s figures released on Tuesday show consumption is still expanding steadily even as recession predictions are being delayed.
Following the retail sales figures on Tuesday, Wells Fargo economists stated: “The trend is stubbornly good.”
The firm went on to say that the more recent increase in retail sales was positive and suggested that consumer spending will continue to be solid going into the second half of the year. After two straight months of low spending, “we’re ready to wave away the near-term bounce as base effects, but we’re weary to doubt households’ resiliency.”
To wit: In March, the firm predicted a 35% risk of the economy entering a recession; this week, the economics team at Goldman Sachs decreased that probability to 20% from 25%.
For investors who follow things like economic and stock market forecasts, a part of this year’s tale is that the forecast itself is foolish. Predictions are challenging, as the proverbial phrase goes, especially when they include the future.