"The US economy Depends More Than Ever on Rich People"

I've mentioned here many times my belief that the strength in the US economy has rested on three pillars, with lackluster growth most everywhere else. One, upper income spending, two, anything related to AI spend including data center construction, and three, anything related to local, state and federal government spending, whether that is related to infrastructure, the Chips Act, the IRA, Medicare, Medicaid and transfer payments. We're obviously on watch with the third factor in light of the scrutiny of government spending but the WSJ yesterday had a great chart in case you didn't see it on how influential upper income spending is on total consumer spending.

The article was titled "The US Economy Depends More Than Ever on Rich People." It said "The top 10% of earners - households making about $250,000 a year or more - are splurging on everything from vacations to designer handbags, buoyed by big gains in stocks, real estate and other assets. Those consumers now account for 49.7% of all spending, a record in data going back to 1989, according to an analysis by Moody's Analytics. Three decades ago, they accounted for about 36%."

What this means is that the direction of the stock market and other asset prices will be the swing factor on maintaining this level of spend. And you can be sure, this income cohort (along with investors around the world) is most likely heavily invested in the Mag 7, appropriately so for many years but something I believe as stated here over the past few weeks, something that should be reassessed as to the extent of that exposure in terms of looking for future returns from here. https://www.wsj.com/economy/consumers/us-economy-strength-rich-spending-2c34a571

Following the above zero prints in both the NY and Philly manufacturing indexes seen last week, the February Dallas regional survey fell back below zero at -8.3 from +14.1 in January and under the estimate of +6.4. Seen though in those two surveys was a similar jump in the Dallas figure in prices paid which doubled from 17.5 to 35 and that is the highest since September 2022. Also seen in the NY and Philly surveys was the drop in the 6 month business outlook. The same can be said for the Dallas one as it dropped to just 7.7 from 35.5 and well below the 6 month average of 22.8. Capital spending plans slipped as well.