“We’ll visit a palace, and dine with a king. We’re gonna start living, you just wait and see … Nothing but the best is good enough for me.” – Frank Sinatra, “Nothing but the Best”
Chart of the Day
Good morning!
The rich can’t stay rich forever. Can they?
Since the pandemic ended, the surprising resilience of consumer spending has served as an unexpectedly stable pillar of the economy. The initial wave of so-called rage-spending was fueled by fiscal stimulus and hefty savings accumulated during the lockdown, and a strong labor market allowed consumers to largely sustain spending levels. Yet afterward, time and time again, consumer spending seemed to ignore an array of metrics that repeatedly emerged to signal that a decline was looming.
Consumers continued to spend when those elevated savings ran out. They kept buying even as inflation started to erode their purchasing power, and went on spending even when the Federal Reserve’s war on inflation led to higher borrowing costs. Even as credit-card delinquencies began to rise in mid-2023, spending levels largely remained stable. U.S. wealth disparity helps to explain why spending has experienced only modest contractions.
The economic pressures mentioned above have been weighing on households within the lower-income demographics in recent years, and recently, they have started to cut back even on some consumer staples, such as snacks and tobacco. Yet at the same time, those in the higher-income brackets maintained and even increased their levels of discretionary spending, thanks partly due to the past two years of strong stock gains and increased home equity values.
In fact, wealthier consumers have come to dominate retail spending: Moody’s Analytics recently found that households in the top 10% by income ($250,000 or more) now account for 49.7% of consumer spending, the highest levels recorded since the research firm started tracking the metric in 1989.
Even the wealthier are now succumbing to the pressures of a tightening macro environment, and that might be bad news for the economy..
About two weeks ago, we referenced the bullish 2025 outlooks of major airlines like Delta and United. Yet this week, major airlines revised those bullish forecasts sharply downward – a telling sign given that a disproportionate share of their revenues are derived from fares targeting the higher-income demographic (seats rated “premium” or higher).
Perhaps more tellingly, credit-card delinquency rates are continuing to rise for high earners. CreditGauge data shows that for those with annual incomes of $150,000 or more, delinquency rates (60 to 89 days behind on repayment) doubled between January 2023 and January 2025 – though they are still relatively low. “We’re seeing heightened credit stress among high-income consumers,” Rikard Bandebo, chief strategy officer and chief economist at VantageScore, told the Wall Street Journal. Still, that’s not necessarily a sign of impending economic doom. Though consumers appear to have gotten more nervous, Fundstrat Head of Research Tom Lee notes that sentiment readings appear tied to – and influenced by – political bias, and thus might not accurately signal the forward path of their finances and ability to continue spending.
One thing, however, remains clear — an economic slowdown doesn’t discriminate. Eventually, everyone is affected.
Catch Up With Fundstrat
Feb Core CPI came in at +0.23% MoM, which is better than consensus of +0.29% MoM and the number is clean. That is, the downside read is due to a weakening of inflationary pressures. For the Fed, this is strengthening the case and overall picture that inflation is under control.
TECHNICAL
Markets are growing closer to tradable lows in this orderly and concentrated decline. At present, it will be helpful to watch for evidence of downtrend lines being broken, which might give some optimism from a structural perspective of a bottom that is currently lacking.
CRYPTO
Crypto is exiting a historically weak seasonal period, but how the rate of change of credit spreads matters more than the absolute levels. We remain cautious on crypto in the near term.
News We’re Following
Breaking News
- Trump’s Ukraine peace strategy put to test after Putin balks at cease-fire WSJ
- Schumer to back Republican bill to avert government shutdown FT
Markets and economy
- Major Japanese firms promise big pay raises in bright sign for economy WSJ
- Gold vaults $3,000 in rush for safety from market, political worry REU
Business
- Abercombie & Fitch must pay for ex-CEO’s criminal sex trafficking defence BBC
- CrossFit is for sale again amid years of shake-ups NYT
- Comcast-owned NBC agrees $3bn deal to broadcast Olympic Games beyond 2032 FT
Politics
- Protesters flood Trump Tower over Columbia student’s arrest WSJ
- Jeanne Shaheen gets candid after her retirement announcement SEM
- Judge orders Trump administration to reinstate thousands of fired workers WSJ
Overseas
- ‘Huawei lobbyists’ held in Belgium raids over EU corruption BBC
Of Interest
- Nvidia’s next chips are named after Vera Rubin, woman who discovered dark matter CNBC
- SpaceX launches NASA mission to relieve stranded astronauts on International Space Station FOR
| Overnight |
| S&P Futures +41
point(s) (+0.7%
) Overnight range: +11 to +46 point(s) |
| APAC |
| Nikkei +0.72%
Topix +0.65% China SHCOMP +1.81% Hang Seng +2.12% Korea -0.28% Singapore -0.04% Australia +0.52% India flat Taiwan +0.03% |
| Europe |
| Stoxx 50 +0.54%
Stoxx 600 +0.38% FTSE 100 +0.33% DAX +0.2% CAC 40 +0.6% Italy +0.35% IBEX +0.57% |
| FX |
| Dollar Index (DXY) +0.08%
to 103.91 EUR/USD flat at 1.0852 GBP/USD -0.18% to 1.2929 USD/JPY +0.76% to 148.94 USD/CNY -0.13% to 7.2337 USD/CNH -0.14% to 7.2378 USD/CHF +0.24% to 0.8846 USD/CAD -0.11% to 1.4423 AUD/USD +0.27% to 0.6302 |
| Crypto |
| BTC +3.11%
to 82823.54 ETH +2.93% to 1895.96 XRP +4.38% to 2.3178 Cardano +4.41% to 0.7224 Solana +3.65% to 125.86 Avalanche +1.52% to 18.78 Dogecoin +4.37% to 0.1694 Chainlink +10.03% to 14.04 |
| Commodities and Others |
| VIX -2.03%
to 24.16 WTI Crude +0.99% to 67.21 Brent Crude +0.9% to 70.51 Nat Gas -0.54% to 4.09 RBOB Gas +0.62% to 2.146 Heating Oil +0.44% to 2.172 Gold +0.34% to 2999.44 Silver +0.34% to 33.98 Copper +0.53% to 4.925 |
| US Treasuries |
| 1M -0.8bps
to 4.2728% 3M -1.7bps to 4.2787% 6M -0.4bps to 4.2218% 12M +0.2bps to 4.0292% 2Y +1.4bps to 3.971% 5Y +2.5bps to 4.0541% 7Y +2.6bps to 4.1769% 10Y +2.9bps to 4.2967% 20Y +2.7bps to 4.6444% 30Y +2.8bps to 4.617% |
| UST Term Structure |
| 2Y-3
M Spread widened 1.0bps to -33.4
bps 10Y-2 Y Spread widened 1.7bps to 32.4 bps 30Y-10 Y Spread widened 0.1bps to 31.8 bps |
| Yesterday's Recap |
| SPX -1.39%
SPX Eq Wt -0.96% NASDAQ 100 -1.89% NASDAQ Comp -1.96% Russell Midcap -1.51% R2k -1.62% R1k Value -0.66% R1k Growth -2.16% R2k Value -1.45% R2k Growth -1.78% FANG+ -2.75% Semis -0.44% Software -3.32% Biotech -1.35% Regional Banks -1.11% SPX GICS1 Sorted: Utes +0.27% Materials -0.13% Healthcare -0.51% Fin -0.55% Energy -0.64% Cons Staples -0.71% Indu -1.05% SPX -1.39% Tech -1.78% REITs -2.0% Cons Disc -2.58% Comm Srvcs -2.67% |
| USD HY OaS |
| All Sectors +19.0bp
to 373bp All Sectors ex-Energy +17.3bp to 338bp Cons Disc +20.1bp to 356bp Indu +18.5bp to 285bp Tech +20.3bp to 379bp Comm Srvcs +19.7bp to 562bp Materials +15.8bp to 332bp Energy +19.6bp to 377bp Fin Snr +20.2bp to 324bp Fin Sub +7.5bp to 234bp Cons Staples +13.8bp to 248bp Healthcare +21.0bp to 396bp Utes +15.8bp to 265bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 3/14 | 10AM | Mar P UMich 1yr Inf Exp | 4.3 | 4.3 |
| 3/14 | 10AM | Mar P UMich Sentiment | 63.0 | 64.7 |
| 3/17 | 8:30AM | Feb Retail Sales m/m | 0.7 | -0.9 |
| 3/17 | 10AM | Mar Homebuilder Sentiment | 42.0 | 42.0 |
| 3/18 | 8:30AM | Feb Import Price m/m | -0.1 | 0.3 |
| 3/19 | 2PM | Mar 19 FOMC Decision | 4.5 | 4.5 |
| 3/19 | 4PM | Jan Net TIC Flows | n/a | 87.144 |
| 3/20 | 10AM | Feb Existing Home Sales | 3.93 | 4.08 |
| 3/20 | 10AM | Feb Existing Home Sales m/m | -3.68 | -4.9 |
