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Chart of the Week

Weekly chart using economic data to address timely market topics from the Wells Fargo Investment Institute Global Investment Strategy team.

October 19, 2021

Michelle Wan, CFA, Investment Strategy Analyst

Strong consumer balance sheets may power Q4 demand

Chart: Strong consumer balance sheets may power Q4 demandSources: Bloomberg, Federal Reserve Board, and Wells Fargo Investment Institute. Household debt service ratio: quarterly data from January 1, 1980 to March 31, 2021. Household net worth: quarterly data from January 1, 1990 to June 30, 2021. This chart was excerpted from the Market Charts: Turning data into knowledge dated October 5, 2021.

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On average, the U.S. consumer is in good shape

Consumer finances after the 2020 recession have held up far better than they did after the financial crisis in 2008-2009. The charts show that consumer debt payments as a percentage of disposable personal income continue to drop, while household net worth has spiked higher.

Support has come from ample savings, gains in wealth from rising stock and home values, the lift to cash flow from mortgage refinancing, and respectable gains in earned income.

What it may mean for investors

We believe the recovery is poised to regain momentum from its current soft patch, supporting a full-year U.S. gross domestic product growth forecast of 6.3% in 2021, which would be the strongest expansion in the past 35 years.

Risks Considerations

Forecasts and targets are based on certain assumptions and on views of market and economic conditions which are subject to change.

Global Investment Strategy (GIS) is a division of Wells Fargo Investment Institute, Inc. (WFII). WFII is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

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