Market Commentary | Jul 23, 2024
2Q2024 Market Commentary: Maintaining Equilibrium
Michael J. AroestyCFP®
CFP®
Following the pandemic, the U.S. economy has maintained an unsteady equilibrium for far longer than most investors expected. Despite high inflation, rapidly rising interest rates, several wars beginning around the globe, and a contentious election cycle, the US economy has steadily grown.
The Young and the Restless
The Federal Reserve’s interest rate hikes have continued to rein in the rate of economic growth. Higher borrowing costs are disproportionally impacting stretched consumers and businesses leading to rising consumer delinquencies, rising corporate bankruptcies, and a falling consumer savings rate not seen since the Great Financial Crisis.
When the Fed began raising interest rates in March of 2022, certain pockets of the economy were immediately squeezed. Younger households, whose incomes are relatively lower, and debt is relatively higher, have felt the most pronounced effect. As a result, credit card and auto delinquencies amongst the youngest consumers are at levels not seen since 2008. The reason this is a concern, beyond the long-term social impact, is that these levels have been reached despite a very strong labor market. The unemployment rate has remained near 4.0% during the post-pandemic period, far below the long-term average of 5.7%. Although employment is high, an increasing number of people are falling behind on paying their bills.
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Michael J. Aroesty
CFP®