Spending for the End of the World Joe Weisenthal and Tracy Alloway Thinking about the dip in savings. Hello and welcome to the newsletter, a grab bag of daily content from the Odd Lots universe. Sometimes it’s us, Joe Weisenthal and Tracy Alloway, bringing you our thoughts on the most recent developments in markets, finance and the economy.
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Here is an entirely unserious chart showing the US personal savings rate as a percent of disposable income versus the word count for “AI” in various news stories. As talk of AI has grown, the savings rate has gone down (it’s inverted on the chart) dipping to 4.1% from 4.6% the month prior. It is an unserious chart because I whipped it up very quickly (using Bloomberg data put through an AI platform) and because correlation doesn’t equal causation (although it might waggle its eyebrows suggestively).
But it does relate to something I’ve been thinking about lately. Tomorrow, we have a conversation coming out with Luke Kawa, head of markets at Sherwood News and our former Bloomberg colleague, where we talk about what’s been going on in markets. Joe gave a bit of a preview when he wrote down a bunch of thoughts yesterday, but one of the things we touch on is the impact of, let’s call it, “existential dread” on consumption and saving.
Data released yesterday also showed consumer spending coming in very strong. Obviously, it’s entirely possible that with higher gas prices and so on, people are spending more on basic necessities and therefore saving less. But it’s also possible that if you keep hearing or reading headlines that the world is going to end because of AI (or whatever other reason), you might be less inclined to save your money for a hypothetical future that seems more and more improbable.
We don’t have great data on what I’m going to call the “nihilistic” spending impulse, but you have to wonder. You could also argue that as people feel that big purchases (like houses) are increasingly out of reach, that they’re spending more on day-to-day purchases. I would describe that as kind of nihilistic.
There’s another AI-related reason you could point to in order to explain the above chart: The AI-driven rally has boosted a bunch of stock portfolios (for those lucky enough to have them) and so equity investors are simply saving less of their paychecks because they’re feeling that overall wealth effect. Again, this is an entirely unserious chart and I don’t mean it to be evidence that talk of AI is definitely making Americans save less. But it does raise a serious question: when the future suddenly starts feeling dramatically different, do people start spending and saving differently too? This morning, we got a cooler-than-expected core PCE reading, and for one minute it looked like the Treasury selloff might take a breather.
But that didn’t last long. Yields across the curve keep going higher. The yield on the 10-year (as of the time I’m typing this) is up to 5.2955, which is its highest since April 2002.
Each day just brings more of the same. In yesterday’s newsletter, I did a roundup of big things that were moving the markets (or may be of relevance to markets), but I forgot to bring up anything in Europe. Of course, like all developed markets, yields in Europe are screaming higher.
But with Europe, there’s always an extra twist since, at least in the Eurozone, EU member states don’t borrow money in a currency that they can print. People don’t talk about an outright “default” like they used to 15 years ago, during the most intense period of the euro crisis. But there’s still a spread between the borrowing costs of the different countries.
Anyway, check out the gap between French 10-year yields and German ones: The consensus se...
Source: Bloomberg Markets · Summarized by HeadlinesBriefing