Personal Saving Rate

U.S. Stock market prices are near all-time highs. Can this trend continue? Here’s something to consider that may support this trend: U.S. personal saving rate.  

Since the late 1950s, the personal saving rate, which is the percent of disposable income a person saves rather than spends, has on average been 8.9% annualized. Since February of this year, the saving rate has been substantially higher, averaging just over 19% (source: fred.stlouisfed.org). People, on average, have been saving more than usual recently. Not surprising given that the pandemic and social distancing practices have led to less shopping and traveling. Add to that lower fuel prices and less work-related commuting. The result is higher overall savings rates.  

What does this mean going forward? As we advance to the other side of this pandemic, there may be pent-up spending. Nearly 70% of U.S. economic activity (gross domestic product-GDP) is based on consumption. In economic terms, saving is a choice between consuming today or in the future. After an unusual year like 2020, it is quite possible we may see consumption increase, driving more economic activity. Carpe diem (seize the day) may be the theme post-pandemic. 

Additional comments: 

• The fiscal stimulus stalemate weighed on stock market results during the week; U.S. large-company stocks (S&P 500) declined on the week after being positive in four of the past five weeks (source: Factset, Inc.) 

• The government budget deficit widened in November; the deficit on an annual basis now represents about 15% of GDP, which is near record highs (source: cbo.gov) 

• December is set to be a record month for initial public offerings (IPOs), according to Bloomberg. Two highlights; Airbnb and food delivery service DoorDash, are looking to raise a combined $6 billion via their long-awaited IPOs 

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