Consumer

As the leaves turn and the nights close in, it would be easy to start batch cooking with an eye on filling up the freezer. The news is all bad. It’s going to be a long winter. And a digital winter at that, if new lockdown restrictions don’t flatten the curve. These are, extraordinary times; and so many new terms. And yet, despite all the doom and gloom, investors need to salt the headlines and remain detached, for the US consumer appears in fine shape. Indeed consumer confidence, despite the many obvious reasons to be sweetening the morning tea with a slug of Bells, is at a seven-month high. Look at other near-live data, such as foot traffic and credit card spend, and it confirms the trend. Consumers are up, they’re in it. Balance sheets are healthy. Total consumer debt as a percentage of disposable income was low going into the recession, and yet now, despite a global pandemic, net worth is near a record high. Interest payments down, net worth up, and FICO credit scores are basically the highest since 2005. See too, what banks and credit card companies are saying about provisioning. Indeed some card companies, such as Capital One and American Express, are now talking about ramping ad spend to gloss up the brand and go after new customers. Is all this joie de vie artificially propped up by stimulus cheques? Has the crunch merely been elbowed into next year? Maybe, but the lagged impact of the unprecedented stimulus response still has cards to play. A few aces up the sleeve. An elevated savings rate should normalise, energy prices remain subdued, unemployment is falling faster than expected and companies are starting to look up, not down. 2021 is in play. The economy is normalising, and will continue to normalise as the risks of Covid are better understood, and better managed. Vaccine or no vaccine. See the recent TSA Checkpoint Travel numbers. See also the surge in new business applications. Indeed, you could even argue, perhaps after too much Bells, that the economy doesn’t need any more stimulus, and any largesse from a new administration might put a little too much heat in the tyres. Cornerstone Macro write “We haven’t been worried about inflation for over a decade, but after the election we’ll be starting a new monthly report: “U.S. Inflation Watch”. Stay tuned.” Hmm. The implications for investors? Re-opening plays.