Thijme Schriek @DrWily: "- 𝗧𝗵𝗲 𝗪𝗲𝗮𝗹𝘁𝗵 𝗘𝗳𝗳𝗲𝗰𝘁 - Now,..."

Netherlands

- 𝗧𝗵𝗲 𝗪𝗲𝗮𝗹𝘁𝗵 𝗘𝗳𝗳𝗲𝗰𝘁 - Now, with the stock market, real estate, and assets like Bitcoin reaching new highs repeatedly, many Americans are feeling significantly wealthier. But in many ways, this is an illusion; all of this new wealth from assets is unrealized, so as soon as prices fall, they won't be as well off as they thought they were. How could this impact the economy? Well, let's look into it! - 𝗧𝗵𝗲 𝗧𝗼𝗽 𝟭𝟬% - Currently, the US economy is in a peculiar state; the Fed has been hawkish, aiming to restrict the economy to tame inflation. And while they have lowered borrowing rates slightly, which stimulates the economy, the economy is still cooling off in general. We can see this in both inflation, which has been decreasing, and the labor market, which is currently struggling. However, if we examine consumer spending, which accounts for 70% of the US GDP, it is evident that the wealthy are sustaining this economy. Quote: "Consumers in the top 10% of the income distribution were behind 49.2% of total spending in the second quarter, the highest level in data going back to 1989, Bloomberg reported Tuesday, citing Moody's Analytics chief economist Mark Zandi. That share ticked up from 48.5% in the first quarter and is well above the roughly 35% level of the early 1990s, according to Moody's Analytics' review of Federal Reserve data, published by Bloomberg." We are living in a weird era; by the looks of it, we are experiencing some form of K-shaped recovery. This means that some parts of the economy are recovering and growing, such as AI, while other parts are slowly deteriorating. It appears that the bottom 50% of Americans are not performing as well as the top 50%, and the rise in asset prices is a significant contributing factor. In many ways, it's a loop that feeds on itself, but two things could stop it. The Fed is slowing down the economy by adjusting interest rates and implementing quantitative tightening, as well as a decline in confidence in financial assets, particularly in AI. As soon as asset prices decline, we could see the overall economy collapse along with it, creating a somewhat perpetual cycle. At the moment, we are certainly in some bubble. The Buffett indicator, which compares the value of the stock market to the actual economy, shows that assets are incredibly overvalued. Levels we have never seen before, at the moment, if we want to return to the 20-year average, indexes would have to drop a solid 50%. Being cautious is undoubtedly not a bad thing, which is why a portion of our portfolio is in cash, as well as some hedges. But who knows how long this bull run will last? Always remember, the market can remain irrational longer than you can stay solvent. Sources: www.yahoo.com/news/articles/top-10-account-nearly-half-232143434.html www.morningbrew.com/stories/wealthy-americans-account-half-consumer-spending www.investopedia.com/terms/w/wealtheffect.asp www.investopedia.com/k-shaped-recovery-5080086 If you liked this short post, FOLLOW my profile for more; if you agree with my investing philosophy, COPY my portfolio to join the ride! My Performance speaks for itself! ✅ +40% in 2024! ✅ Well-diversified portfolio! ✅ Long-term mindset! ✅ Low-risk score of only 4! Be sure to copy my portfolio! $SPX500 $NSDQ100 $NVDA (NVIDIA Corporation) $AMD (Advanced Micro Devices Inc) $BTC

5 Mentioned

SPX500

NSDQ100

NVDA

NVIDIA Corporation

AMD

Advanced Micro Devices Inc

BTC

Bitcoin

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