The S&P 500 index recorded its sixth consecutive quarterly gain as of Thursday, September 30, ending slightly (0.2%) above where it started the quarter after hitting all-time high on September 2. The Dow and Nasdaq indexes ended the quarter lower than they started, but all three major U.S. stock indexes (the S&P, Dow, and Nasdaq) posted year-to-date gains of approximately 15%, 11% and 14% respectively, as of September 30.
Global markets continue to show resilience as the economy recovers from the pandemic. Uncertainties about the impact of variants, supply-chain issues and inflation do remain, and are creating some bumps along the way. However, we continue to see positive economic adjustments and remain optimistic that the economy will continue to improve.
And on that note, we wanted to highlight the Federal Reserve’s quarterly report on household, business, and government financial accounts, which was released on September 23. News outlets rather quietly documented the 200+ page report, yet it featured some very optimistic highlights that are summarized for you below.
- Net private household savings grew at an annualized pace of almost $2.9 trillion in the second quarter of 2021.
- U.S. household net worth hit new records as of June 30, 2021, increasing by $5.9 trillion (4.3%) from the previous quarter to $141.7 trillion.
- This advance included a $3.5 trillion gain in the value of equities and a $1.2 trillion improvement in real estate values held by households.
- Equity shares as a percent of total household assets increased to nearly 29.5% up from 25.6% in 2019.
Pause there and consider the above. Unprecedented government stimulus during the pandemic directly contributed to this drastic increase in Americans’ wealth. Household wealth has increased by a whopping 28% ($31 trillion) since the first quarter of 2020. This tremendous amount of stimulus put personal balance sheets in better shape than ever before.
All of these excess savings are expected to continue driving consumer spending (the biggest source of U.S. economic growth) and power the post-pandemic recovery into 2022. And that is exactly what is happening.
A U.S. Commerce Department report released on Friday, October 1 announced a 0.8% rise in consumer spending between July and August. Constraints such as U.S. port backups, pandemic-related manufacturing disruptions and the global chip shortage could dampen things, but the Federal Reserve and other economists expect these disruptions to eventually subside.
The Commerce Department report also pointed to the U.S. economy’s 6.7% expansion in the second quarter of 2021, up from 6.3% in the first three months of this year. The upcoming holiday season is expected to provide another consumer spending boost to the economy.
Speaking of holiday consumer spending, there are countless online tips for better managing your holiday spending. We’ve curated some of our favorites for you below.
- Set Realistic Spending Limits. The holidays are an opportunity to review what can safely come out of your bank account for gifts. Setting realistic limits on your purchases, and holding yourself to them, will relieve financial stress so you can better enjoy the season, and the coming year.
- Collect Coupon Codes. Keep your eye out for coupon codes from favorite stores in your email. Perform a quick web search for coupon codes before you check out online. Set calendar reminders as online sales are announced at your favorite stores.
- Give Your Time. Close friends or family may love nothing more than a visit from you, a home-cooked meal or a free night of babysitting. Gifting a handmade certificate to redeem when the time is right may be just what they want.
- Select Personalized Gifts. A thoughtful, simple gift is often much more meaningful than a more extravagant purchase. Take a moment to think about those on your list and what they could really use or enjoy based on their personal interests and hobbies.
We hope these tips start your holiday shopping on a reflective note. And finally, while we at Charter Oak firmly believe the economy cannot be accurately forecast and markets cannot be perfectly timed, we cannot help but feel optimistic for the U.S. and world economy when reviewing highlights of the reports discussed above.
Things will get moving again and, to quote the Maxine Nightingale 1970s pop song, we may soon “get right back to where we started from” (this time with renewed perspectives on life and much stronger savings accounts). It is a pleasure and a privilege to serve as your financial advisory team. We wish you many happy and healthy fall days ahead.