Investors Brace for the American Consumer's Impending Wall

According to Bloomberg's Markets Live Pulse survey, more than half of respondents believe that personal consumption, the main driver of economic growth, will shrink in early 2024, marking the first quarterly decline since the pandemic began. Another 21% predict this reversal will happen even sooner, in the last quarter of this year, as high borrowing costs and dwindling Covid-era savings impact household budgets. This finding contradicts the optimism seen in US equity markets, and if consumer spending contracts, it could lead to further downside for stocks. While the US economy is currently showing signs of growth, some analysts question the sustainability of this strength, attributing it to temporary factors such as a summer splurge on entertainment. Headwinds such as rising delinquency rates on credit cards and auto loans, as well as the impending resumption of student loan repayments, pose challenges for consumers in the coming months.