63% can’t handle $400 emergency; Inflation hurts wallets.

‘Turbulence ahead’: Nearly 4 in 10 Americans lack enough money to cover a $400 emergency expense, Fed survey show. Based on the content of the above article, we can come up with the following trading recommendations:

Given the current high inflation in the United States, where the Fed is responding by raising interest rates and consequently strengthening the dollar, it may be worth considering various trading strategies. For instance, one could explore shorting the dollar against other currencies, such as the yen or the euro.

Furthermore, with the U.S. labor market experiencing robust growth, accompanied by increasing wages and a projected surge in consumer spending, it might be prudent to consider investing in U.S. consumer stocks. Companies like Amazon and Walmart, among others, could be potential long positions to capitalize on these trends.

In times of inflation, which often lead to decreased savings and potential challenges for retirement plans, it is advisable to seek out safe-haven assets that can help protect wealth from erosion. One such asset class worth considering is gold, which historically tends to perform well in inflationary environments.

Lastly, as inflationary pressures can make it difficult to handle unexpected expenses, it could be beneficial to consider long positions in credit card companies or other financial services firms. Stocks like Visa or Citibank, for example, might present opportunities to benefit from the increased demand for financial solutions during inflationary periods.

The above suggestions are for reference only. Please make reasonable position adjustments and trade direction choices based on your own risk tolerance and market conditions.

The original article is as follows:

Caixin, May 23 (Editor Xiaoxiang) – The latest annual report on the economic well-being of households released by the Federal Reserve on Monday (May 23) showed a sharp decline in Americans’ finances last fall as high inflation eroded income and savings.

The survey, conducted in October 2022, found that while households continue to benefit from a strong labor market boost, rising prices have forced more U.S. households into a state of economic uncertainty.

The percentage of adults who believe their financial situation has worsened from a year ago climbed to 35 percent, the highest level since the Federal Reserve first surveyed the issue in 2014. Overall, 73 percent of adults believe they are doing OK or living comfortably, down from 78 percent in 2021 and 75 percent in 2020.

The survey counted more than 11,000 U.S. adults and their families’ financial situations.

Inflation is emptying Americans’ wallets

Federal Reserve officials said high inflation is the most frequently mentioned financial burden factor for Americans in the survey. About 54 percent of adults said rising prices have greatly affected their budgets. This financial strain is felt relatively more by the black community, parents living with their children and people with disabilities.

Nearly two-thirds of U.S. adults say inflation has forced them to cut back or stop using a good altogether. About 18 percent of respondents said their response to rising prices would be to work more or find another job, while 8 percent of adults responded by asking for a pay raise.

U.S. price increases have eased since the survey was conducted last fall, though they are still well above the Federal Reserve’s 2% inflation target. Data released earlier this month showed the U.S. CPI rose 4.9 percent year-over-year in April, after hitting a peak of 9.1 percent in June last year.

The Fed has been aggressively raising interest rates for the past year or so, trying to curb inflation by slowing economic activity. The Fed earlier this month has raised short-term interest rates for the 10th consecutive time, pushing the target range for the federal funds rate to a 16-year high.

Hot labor market provides boost

Some of the few welcome changes in Monday’s report lie in the benefits of a strong labor market. According to monthly data from the U.S. Department of Labor, the unemployment rate fell to 3.4% in April and payroll growth remained high.

In the latest survey, one-third of U.S. adults said they received a raise or promotion in the most recent year, three percentage points higher than the rate in 2021 (30%). Among respondents who asked for a raise last year, 70 percent said they had received one.

Last year, about 13 percent of adults asked for a raise or promotion, compared with 9 percent in 2021.

Adults with more education are more likely to have asked for or received a raise, and certainly more likely to have started a new job or left voluntarily in the last year.

In response, however, the chief international economist at ING (James Knightley) said, “With unemployment at a record low and job openings at a record high, the deterioration in households’ financial situation is extraordinary.”

Only 63% of adults can afford to take out $400 for emergencies

The Fed’s survey also found that inflation is making it more difficult for people to save. About 51 percent of Americans have cut back on their savings because of rising prices. Only 31 percent of adults who have not yet retired report that their retirement savings plans are on track, down from 40 percent in 2021.

The survey said the deterioration in household finances has made it harder for people to pay for unexpected expenses. Only about 63% of adults say they can come up with $400 in cash or its equivalent to cover possible surprises in an emergency, a percentage that is below the high of 68% in 2021 while having fallen back to pre-pandemic levels.

Many noted that they were able to rely on credit cards or other family members to make such bill payments. And about 13 percent said they were unable to make this payment in any way.

This shyness in the pocketbook is more pronounced among those with parents. Federal Reserve officials say this may be due to the end of the federal child tax credit that was in place last year during the pandemic.

Of course, historically, the percentage of U.S. adults who can come up with $400 in emergency funds has not been very high, according to the Fed’s survey. In 2013, that percentage was as low as 50 percent. That percentage has risen in the last decade, especially in the wake of the new crown epidemic – the massive bailout funds and checks handed out by the U.S. government once brought the percentage to a peak of 68 percent in 2021.

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