Despite high inflation and other economic woes, household wealth in America has swelled in recently years. As such, many consumers have been able to spend money on higher-priced items and experiences, such as travel and concerts.
“It’s well known that the lowest income consumer is really struggling with inflation, but from a purely economic standpoint, it is the higher quintiles of earners that do the most spending,” said Nanette Abuhoff Jacobson, global investment strategist at Hartford Funds.
However, there are signs that those wealthy Americans are starting to reign in their spending. Profits at luxury retailer Burberry plunged by 40% over the past year, while LVMH Moët Hennessy Louis Vuitton reported that demand for high-end liquors has dropped in the U.S. On the other side of the spectrum, discount retailer Walmart said that its recent financial gains can be attributed to higher-income households.
“When we talk to CEOs and CFOs, they’re saying that people are pushing back, so companies now aren’t feeling as comfortable pushing through price increases,” said Jacobson of Hartford Funds. “And company earnings in the consumer discretionary area are ones to continue to watch for signs of consumer stress.”
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