In this week’s Steady Investor, we explore current market news that we believe investors should keep on their radar, such as:
• Rising credit card debt
• China steps up stimulus
• The current growing economy
Credit Card Debt is Rising – A Sign that Consumers Are in Trouble? Armed with stimulus money following the pandemic, Americans paid down credit card debt at a rapid clip, and the delinquency rate on credit cards fell to its lowest level in decades. 2023 was a turnaround year in credit card spending—but not in a good way. Consumers had a banner year of spending, but data shows that an increasing amount of that spending was put on credit cards. Money center banks reported that credit card spending went up significantly in 2023, with JPMorgan Chase showing a 9% increase and Wells Fargo reporting a 15% increase. A strong labor market and rising real wages are bolstering Americans’ ability to spend, but some may be stretching a bit too much. Banks also reported that it is taking Americans longer to pay off balances, with unpaid balances passing 2019 levels for the first time. The bottom line in 2023 is that U.S. consumers appeared to spend more than they made, which makes this data worth scrutinizing in the new year. We don’t think it’s time to raise alarm just yet—as seen in the chart below, delinquency rates shot up over the past year, but remain below the long-term average over the past three decades.1
What Can Investors Expect in 2024? Get Our Insights and Tips!
Will this year bring a “soft landing” for the economy or a bumpy ride? There are many factors that could influence the economy in the months ahead.
In our exclusive January 2024 Zacks Market Strategy Report, we look at other potential outcomes—including an economy in 2024 that is much stronger or weaker than most pundits expect.
Download your free report now for our insights, including:
• Betting against a soft economic landing
• Consumer spending is up, but Americans are feeling down. Why?
• How earnings estimates may evolve in 2024
• And much more!
If you have $500,000 or more to invest and want to learn more, download your guide today!
Download Our Exclusive “Market Strategy Guide”2
Delinquency rates have moved sharply higher, but are still below longer-term averages
China Steps Up Stimulus to Ail Slowing Economy – China is best known as the ‘world’s manufacturing floor’ and a powerful export economy. But what is less well-known is how crucial the real estate sector and related industries are to the overall economy, which combined account for roughly 25% of the country’s GDP. And for the past two years, China’s property sector has been mired in a downturn that is dragging economic growth down with it. Layoffs in the sector have been high, and Chinese consumers are shifting into saving mode as their confidence for a real estate market revival dim. Sales of new homes in China fell 6% last year, falling back to 2016 levels, and existing home prices in some of the country’s most populated cities have fallen over 10%. Markets have been anticipating that the Chinese government would step in forcefully to stem the downturn, but the past year was largely disappointing in the realm of fiscal or monetary stimulus. That narrative started to change last week, with China’s central bank announcing it would cut banks’ reserve requirements in an effort to free up more cash for lending to households and businesses. Investors are eager to interpret these announcements as the beginning of a full policy pivot, but it is arguably too early to tell.4
Leading Economic Indicators Point to Recession, But Economy Keeps Growing – What was once a steadfast indicator for recessions and expansions—the Conference Board’s Leading Economic Index (LEI)—has ostensibly lost a bit of its luster. Since the beginning of 2022, the LEI has been sending strong signals that the U.S. economy was charging toward a recession. On Monday of last week, the Conference Board reported that the LEI has now fallen for 22 consecutive months. The recession never arrived. Instead, the Bureau of Economic Analysis reported today that the U.S. economy grew by 3.3% in the fourth quarter (“advance” estimate) and 3.1% in 2023, an indication that the economy accelerated when LEI has been predicting for several months that it should be contracting.5
The Conference Board continues to believe a recession is around the corner, predicting that the U.S. economy would contract in Q2 and Q3 but then recover late in the year. Time will tell.
Investing in 2024 – It’s becoming a consensus in the investing world that 2024 will bring a “soft landing” for the economy—meaning that inflation and other problems will be resolved without a recession or significant market downturn.
No one knows what’s to come in this fluctuating market; however, to ease your uncertainty, I am offering our free January 2024 Zacks Market Strategy Report. This report focuses on potential market outcomes, such as:
• Betting against a soft economic landing
• Consumer spending is up, but Americans are feeling down. Why?
• How earnings estimates may evolve in 2024
• And much more!
Download Our Exclusive Market Strategy Report6
Disclosure
2 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion.
3 Fred Economic Data. November 20, 2024. https://fred.stlouisfed.org/series/DRCCLACBS#
4 Wall Street Journal. January 23, 2024. https://www.wsj.com/world/china/desperate-chinese-property-developers-resort-to-bizarre-marketing-tactics-1dd4d35e?mod=djemRTE_h
5 BEA. 2024. https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate#:~:text=Real%20gross%20domestic%20product%20(GDP,real%20GDP%20increased%204.9%20percent
6 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion.
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