No one will deny we, as a country, are going through an odd period in history. When you mix the lingering effects of a long pandemic, a booming (though starting to cool) housing market, supply chain issues, and rapid inflation, you get a messy financial stew. With so many factors converging, it’s easy to find some bad news in the bunch…and that, unfortunately, is largely what we’re hearing.

We hear about the Fed raising interest rates (to a very normal and healthy level, historically). We read about shortages of baby formula or certain brands of cat food. We see prices rising at gas stations and in restaurants. But, here’s the thing: we’re actually fine.

How do I know? These three signs (among others) point to continued prosperity in our nation and a future of financial growth.

1. We have piles of cash

According to the April, 2022 Economic Report of the President, “By the end of 2021, the stock of ‘excess’ savings during the pandemic interval accumulated to $2.7 trillion.” In other words, Americans had socked away $2.7 trillion in savings. Incredibly, that’s also (approximately) how much debt Americans hold, meaning our net debt (collectively) is zero. You read that right. If we all pooled our savings, we could erase collective personal debt. We haven’t achieved this ability to pay off debt in 30 years.

When excess cash is readily available, it’s a good idea to funnel some of it into an emergency savings fund. If you are concerned about inflation and consider this to be a time of “emergency,” it’s a great time to tap into your extra cash reserve (if you don’t have an emergency savings account, learn more about the merits of starting one HERE). For the record, I do not think we’re in an emergency situation (as a nation). Read my article about why I’m not panicked about high inflation for my perspective.

2. Consumer spending is steady

People might be complaining about that $2 increase for their favorite turkey sandwich, or grumbling about prices at the gas pump, but they’re not curbing their spending habits. As a nation, we’re still humming along like usual, buying shoes at Walmart or cat toys through Amazon. A recent survey by McKinsey & Company found that, despite inflation rising by 8.5 percent in March, consumers spent 18 percent more in that month than they did two years earlier. They also blew away pre-COVID forecasts, spending 12 percent more than projected. So far, consumer sentiments seem to remain optimistic (which is a very good thing!).

3. Corporations are still flush with cash

Over the past 20 years, the cash reserves of US companies have risen from $1.6 trillion to approximately $5.8 trillion. Part of the reason for this cash hoarding is so companies can protect themselves from the very things that seem scary today—runaway inflation, supply chain issues, and the like. They’re prepared. They have the cash to float through difficult times (and any potential recession) with relative ease. Rest assured, they’ll be just fine.

4. Insider buying indicates a market rally

Recently, corporate insiders have been buying up stocks at a fairly aggressive pace. That’s noteworthy because these individuals are generally in the know. They usually have a good inkling of when a company will start performing better on the market. Their actions can be a barometer of what is to come. If they’re feeling optimistic, you should probably feel optimistic too.

 

Though we’ve been hearing the opposite for months now, Americans are doing just fine and will most certainly make it through this economic rough patch. This is nothing we haven’t experienced before, and we can muddle through. In fact, this could be an excellent opportunity for strategic investing. As always, I encourage you to consult a financial advisor before making any major investment decisions.

Leave a Reply