Navigating this week’s market requires clarity and focus. In this week’s Steady Investor, we break down three key themes shaping the investment landscape—so you can stay informed and make confident decisions:
• U.S. consumer spending remains strong, but becoming more uneven
• U.S. business sector sees slight deceleration in January
• A bright spot in the U.S. housing market shows signs of dimming
U.S. Consumer Spending is Strong, But Increasingly Uneven – When analyzing U.S. macroeconomic data, it is fair to say that consumer spending is strong. But this broad view deserves a closer look, as it reveals some bifurcation in the marketplace. As of the third quarter of 2024, the top 10% of earners—households earning approximately $250,000 or more annually—accounted for a record 49.7% of all consumer expenditures, a significant rise from about 36% in 1989. Between September 2023 and September 2024, this wealth cohort—bolstered by rising equity and housing prices—saw spending surge by 12%, while middle and working-class households experienced a decline in expenditures during the same period. Over the past four years, middle- and lower-income households have seen their spending increase by only 25%, barely outpacing the 21% rise in prices during that time. This disparity highlights factors worth monitoring in the coming year(s). A tax cut with deregulation and rising equity prices could fuel this spending even further, pulling economic growth higher as well. But a downturn affecting the financial confidence of these top earners could significantly impact overall economic stability, given their outsized role in driving consumption. Among the risks to watch out for: rising layoffs in white-collar industries, a stock market decline, or a drop in real estate values.1
Market uncertainty is rising, and keeping cash won’t protect your future. With volatility and fluctuating interest rates, relying on the wrong investments could leave you short on income.
A portfolio focused on dividend-paying stocks could provide more stability. Get our guide,
Retirement’s Uphill Battle: Generating Income in a Low Interest Rate Environment2, to learn how to secure your cash flow. Topics covered include:
• The downsides of other income-producing options, such as annuities and closed-end funds (CEFs)
• How dividend stocks can help reduce downside volatility
• The importance of choosing the right corporate bonds and dividend stocks
• The tax advantages of dividend stocks
• Plus, many more reasons this strategy can help you generate income in retirement
If you have $500,000 or more to invest, click the link below to get our free guide today!
Retirement’s Uphill Battle: Generating Income in a Low-Interest Rate Environment.2
The U.S. Business Sector Experiences Slight Deceleration in January – The Institute for Supply Management (ISM) reported that its nonmanufacturing Purchasing Managers Index (PMI) decreased to 52.8 from December’s 54.0, indicating continued growth in the U.S. services sector—but at a more subdued pace. Monitoring service sector activity is crucial, as it constitutes over two-thirds of the U.S. economy. What’s more, the slowdown is attributed to softened demand, as evidenced by the new orders sub-index falling to 51.3 from 54.4 in the previous month. Cooling in the services sector may aid in tempering inflation, but it runs counter to the goal of accelerating economic growth. The good news—at least for now—is that a big part of the drag on services sector activity came from sinking sentiment, which could easily prove temporary. As such, it is too early to label one PMI print as a trend in the wrong direction, but this data set will be worth monitoring in the coming months. Uncertainties tied to ongoing trade policies and potential geopolitical tensions could impact activity.3
A Bright Spot in the U.S. Housing Market Shows Signs of Dimming – Over the past year or so, existing home sales have remained sluggish while the market for new homes has seen stronger activity. January may have thrown this strength into question. New single-family home sales declined by 10.5% from December, reaching a seasonally adjusted annual rate of 657,000 units. This figure represents a 1.1% decrease compared to January 2024. Several factors contributed to this decline. Persistently high mortgage rates, averaging around 6.9%, have significantly impacted affordability, deterring potential buyers. The median sales price for new homes also keeps going up—in January, prices rose by 3.7% year-over-year to $446,300, marking the highest median price since October 2022. The average sales price was $510,000. Finally, severe winter weather conditions in regions like the Northeast and Midwest further suppressed sales activities. These numbers are largely discouraging, but they likely don’t signal a major warning for the overall U.S. economy. Housing’s contribution to U.S. GDP is about 15%, with just 4% coming from residential fixed investment (RFI).4
Boost Your Retirement with Dividend Stocks – In today’s uncertain market, relying on cash won’t safeguard your retirement. Focus on stocks with strong earnings and a history of dividend growth to potentially generate stable income.
We recommend downloading our guide, “Retirement’s Uphill Battle: Generating Income in a Low Interest Rate Environment5”, to dive into topics like:
• The downsides of other income-producing options, such as annuities and closed-end funds (CEFs)
• How dividend stocks can help reduce downside volatility
• The importance of choosing the right corporate bonds and dividend stocks
• The tax advantages of dividend stocks
• Plus, many more reasons this strategy can help you generate income in retirement
If you have $500,000 or more to invest, click on the link below to get our free guide today!
Disclosure