NOVEMBER WAS A STRONG MONTH FOR THE U.S. MARKETS: The shortened trading week ended as another positive week and capping off a month with a 3% gain (approximately). This time of year, a key driver is consumer behavior. Are they shopping? Although it is too soon to know for sure, solid data on household spending and orders for durable goods early in the week created some early optimism this holiday season. A solid sign of consumer spending came in late on Friday when it was reported that online sales for Black Friday hit a new record at $5.4 billion as of 9:00pm, about a 22% increase from last year. U.S./China trade issues didn’t move markets much this week, despite concern about Chinese retaliation to President Trump signing a bill put on his desk by the Congress that supports Hong Kong protestors. With the latest round of tariffs set to begin on December 15, creating the latest deadline, what happens there will likely make or break the month of December, despite what consumers do.
UPON FURTHER REVIEW: The U.S. Bureau of Economic Analysis always releases its preliminary conclusions on U.S. economic growth each quarter (GDP). It’s preliminary finding for the third quarter was that the economy grew by 1.9%. After reviewing the data more fully, the Bureau revised that number to 2.1%. This followed the second quarter rate of 2.0%. That was a welcome revision and a further confidence booster.
U.S. HOUSEHOLDS CONTINUE TO MOVE IN THE RIGHT DIRECTION ON DEBT: Since the Great Recession, U.S. households have been lowering their overall debt burden, especially when it comes to home debt. As you can see in the graph below, which tracks data back to 1980, mortgage debt (the blue line) peaked in 2007 and has been steadily falling since. Overall household debt peaked at 13.2% and is down to 9.69%. This has been edging downwards. Consumer debt, which includes student loans, car loans, and credit cards, is moving up again. The average U.S. consumer obviously learned a lesson about being overleveraged with their homes. I hope the same lesson sticks with overall household debt. Economists like it when consumers spend, but when it is at the cost of being over leveraged, it is not a good thing for the long term.