We have mentioned in the past that the U.S. economy is largely driven by the U.S. consumer. To refresh memories and to help visualize our point, please look at the chart below.


 Chart 1

 As can be readily seen, it is the American consumer which is the “big dog” regarding the health and wellbeing of the American economy. If the American shopper is out and about, America does well. But over the past year, the American shopper has been denied access to many of the usual haunts (think restaurants, movies, theaters, concerts, museums, etc.) because of the COVID-19 pandemic.

So how financially fit is our consumer to resume his or her consuming ways as the pandemic recedes from epidemic proportions? When looking at broad-based national numbers, our response would be that the American consumer is in good shape to recommence shopping. Obviously, there are pockets of the U.S. economy which have suffered mightily during the pandemic and as a result, there are people who have suffered greatly. But our populace, writ large, would seem to be in fine financial shape to consume as they once did.



Looking to the left of Chart 2, the reader will see the Consumer Balance Sheet. Please note in particular the low level of liabilities and compare that level of debt ($16.8 trillion), to the measure of total assets ($140.3 trillion). In fact, if one looks at the measure of deposits (i.e. cash) held by consumers, it appears as though the cash held equals the total liabilities owed by consumers. Next let’s look at the household debt service ratio in the upper right corner of Chart 2, which is at a very low 9.1% of personal disposable income. Finally, one should examine the bottom right corner of Chart 2 and notice that Household Net Worth is at an all-time high. In short, the American consumer is in rude economic health and should be ready to consume when given the “all clear” sign by the medical authorities.
The U.S. economy is largely powered by the American consumer. Having been “shut out” for months from many entertainment/social activities, we think that the U.S. consumer will return in force during 2021 and in turn power the American economy to economic growth rates not seen in the U.S. for years. Corporate America should be a beneficiary of this consumption “reawakening” and company earnings should rise smartly, which should support stock prices in the markets.