Skip to content
Global Allocation Insight

The resilience of the U.S. consumer

October 21, 2019

We see four key trends behind a thriving U.S. consumer.

Amid a growth deceleration in the global economy and increased geopolitical risk, we believe the pivot by the world’s central banks toward greater monetary accommodation coupled with U.S. consumer strength is helping to propel a more supportive backdrop for global economic growth.

We see four key trends allowing the U.S. consumer and household sector to continue to thrive.

Rising income

Rising income. Average hourly earnings are up 3.2% year-over-year. While this is modest by the standards of past recoveries, this level of wage growth is comfortably ahead of inflation (which has been running just below 2%). The combination of solid wage growth and job creation with modest inflation supports increasing levels of real disposable income

Low rates

Low rates. While low interest rates are not engendering the same type of housing or refinancing boom we’ve seen in previous cycles, they are supporting the consumer in general and housing in particular. Home sales have accelerated in recent months, which can be an important tailwind for the broader economy.

Growing wealth

Growing wealth. Unlike the previous decade, U.S. consumers are demonstrating uncharacteristic restraint. The household savings rate is a healthy 6.2% — roughly triple the 2005 low. Higher savings balances coupled with an unusually long bull market have pushed household wealth to a record high, over $113 trillion.

Less debt

Less debt. Perhaps the biggest difference versus the last cycle is that consumers are less indebted. On the eve of the financial crisis, consumers were contending with record levels of debt. At its peak in 2007, household debt exceeded 130% of disposable income. Today, household debt is less than 100% of income. Not only are debt levels lower, but thanks to historically low yields, the cost of having debt is also low.

What does this mean for investors? A robust consumer, along with relentless cost cutting and a secular shift toward a services-oriented economy (services generally have higher profit margins than manufacturing) has led to record levels of profitability, especially for consumer companies. Although some segments are struggling (e.g., department stores and some specialty retailers), we believe the consumer sectors overall remain strong.

Within the BlackRock Global Allocation Fund, we recently increased exposure to U.S. consumer stocks based on our expectation that consumer spending will continue to be resilient. The fund’s exposure broadly ranges from U.S. e-commerce companies to select housing-related and restaurant stocks.

View fund commentary

Russ Koesterich, CFA, JD
Russ Koesterich, CFA, JD, Managing Director and portfolio manager, is a member of the Global Allocation team.   Mr. Koesterich's service with the firm dates back to 2005, ...

Spotlight on Global Allocation

Rick Rieder reflects on his first 100 days as a portfolio manager of the Global Allocation Fund.

Global Allocation Resources

See how the Global Allocation Fund has outperformed global stocks with one-third less volatility.*
See how the Global Allocation Fund may help to address concerns on investors' minds today.
Global Allocation Monthly Insights
Subscribe to get timely market outlooks and portfolio positioning insights every month.

For Financial Professionals Only.
Subscribe now Subscribe now