Older Americans who have benefitted financially from the stock and housing markets have become the primary spenders in the U.S. and are driving growth for the country’s economy.
Their spending on higher-priced services such as health care, entertainment and travel are pushing prices up and contributing to delays in future federal interest rate cuts. In fact, these older American may benefit from higher interest rates if they own government bonds, as it would generate more income from higher bond yields.
Earlier this year, it was thought that the Federal Reserve would cut interest rates around three times this year. However, that prediction has slowly faded from view as consumer spending continues to remain steady.
“People have had significant wealth gains in stocks, significant wealth gains in fixed income, significant wealth gains in home prices, significant wealth gains even in crypto,” said Torsten Slok, chief economist at the Apollo Group. “All that adds up to still a very significant tailwind.”
