Due to reduced spending, cash balances were in a significant number during the pandemic.
The value of cash balances was eroded by high rates of inflation. (Photo: Metrobank)
The Failure Of Cash Balances
US households’ cash balances were expected to cushion the economy. But the said cash balances have been depleted by inflation, according to an analysis by Bespoke.
Consumers amassed significant cash balances during the pandemic due to reduced spending and government stimulus checks. These cash balances supported the slowing economy, allowing consumers to continue spending.
However, inflation has eroded the value of these cash balances, leaving little dry powder to drive consumption growth. Most Americans have the same level of cash balances as they did in 2019 when factoring in rising prices.
According to a published article by SmartNews, aside from the depleted cash balances, signs of deteriorating financial health, such as record-high credit card debt and the resumption of student loan payments, indicate potential trouble for the US economy. A decrease in consumer spending could contribute to a slowdown and pose a risk of recession in 2024.
Bank of America’s Recent Note
In a published article by Bussiness Insider Africa, Bank of America (BofA) noted that its Bull & Bear Indicator, a stock market gauge that signals a buy or sell signal based on investor sentiment, has shifted from bullish to neutral territory.
This change comes as global stock indexes are over their moving averages. Despite a recent rally in the US equity market, signs are emerging that equities may not be able to sustain their gains.
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