The American stock market has been performing exceptionally well, with the S&p 500 index of large companies soaring by nearly 15% in the past three months, reaching a record high. Recent economic data has further fueled investors’ optimism, with 353,000 jobs created in January and the economy growing by a healthy 3.3% in the final quarter of 2023. Despite this positive outlook, there are concerns about inflation and the potential impact of maturing pandemic-era debts on America’s $21 trillion non-financial corporate debt.
Chairman of the Fed, Jerome Powell, has expressed reservations about an imminent rate cut, citing concerns about inflation levels. Additionally, profits are showing minimal growth, with a modest 1.6% year-on-year increase reported by S&P 500 firms in the final quarter of last year. There are also concerns about weakening forces that have been supporting profits, particularly in relation to consumer spending.
Consumer spending, which defied expectations of a recession in 2023, is showing signs of slowing down. The excess savings accumulated during the pandemic have been largely spent, leading to rising default rates on credit cards and added pressure from student loan repayments. These factors are contributing to concerns about the sustainability of consumer spending and its potential impact on the overall economy.
2024-02-04 04:36:06
Source from www.economist.com