over 1 year ago • 1 min
Americans have been spending more and more in the last year or so, with their savings now representing just 4.4% of their monthly disposable income. That’s usually a good sign: it suggests they’re feeling confident enough in the economy that they’re willing to splurge. But that probably isn’t the case this time around. This time around, prices are rising so fast that they’re dipping into their savings just to afford what they need.
We’ve seen this same situation play out before: back in the 1970s, when there was a similar backdrop of high inflation alongside a slowdown in economic growth. And if we use that as a guide, we know that Americans became increasingly nervous about the prospect of a recession, tightened their purse strings to all but the absolute essentials, and sent their monthly savings up to 15% of disposable income.
If the same thing happens here, you can bet that consumer discretionaries – nice-to-haves – are going to get cut from the shopping list (if they haven’t already). So you might want to be more cautious about investing in things like the luxury and auto sectors, and opt for services and products no one can do without: consumer staples, utilities, and healthcare. You invest in those via the Invesco S&P 500 High Dividend Low Volatility UCITS ETF (ticker: HDLG, expense ratio 0.3%), or take your pick from similar exchange-traded funds here.
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