A Slumbering Giant Is Opening Its Wallet

Two years ago, slippers went stratospheric.

Normally, they sell in cycles. There is an "on" season for slippers through the fall and winter. Then, sales taper off during the warmer months.

But 2020 was different. Slipper sales that April almost doubled versus 2019.

The COVID-19 pandemic was in full swing. Folks were in no hurry to leave their homes. They were dressing for leisure, streaming entertainment, and saving their cash... And while we saw odd bursts in products like slippers, huge swaths of the economy suffered.

But today, a big thaw is coming to the global market. Travel plans are on the rise, spending is back – and a slumbering giant is about to return with new buying power...

It's a demographic that has stayed quiet during the pandemic reopening. These folks preferred to play it safe while other consumers rejoined the in-person world.

That's changing now. And the resulting economic growth could be massive.

After two years of isolation, older Americans are about to open their wallets...

Older Americans have been the most cautious since the start of the pandemic.

One way to see this is the Spending Momentum Index ("SMI"), a measure of consumer spending from Visa. The SMI measures the share of Visa cards that has increased or decreased spending compared to the same period a year earlier.

An SMI higher than 100 shows a stronger spending momentum from the year prior. An SMI below 100 shows weaker momentum.

From March 2020 to January 2022, the 25- to 44-year-old demographic had an average spending momentum of about 106.4. The 45- to 64-year-old demographic showed more restrained growth, for an average SMI of 101.1.

However, the spending momentum of Americans 65-and-up actually fell. Their average SMI was only 97.6 for the period, making older Americans the only demographic to spend less on average during the pandemic.

It makes sense. Older folks were the most at risk of severe illness. So they were doing less than anyone. And their spending dropped more as a result. That's changing, though...

Visa's newest data suggests the purse strings are loosening. This February, the older demographic leapfrogged 45- to 64-year-olds.

Older consumers are spending once again. And their pockets are deeper than ever...

We all know that stocks and real estate went on a tear in 2021. But what you may not know is that, between fall and winter, these assets pushed U.S. household net worth up by $5.3 trillion dollars. Total household net worth surged to a record $150 trillion...

Roughly 41% of this money is in the hands of Americans 65 and older.

This cash is burning a hole in these consumers' pockets. And as they return to the economy, the impact will be huge.

Travel should be a big winner. According to AARP Research, 67% of adults 50-plus are planning at least one trip in 2022... with an average plan for four. And travelers plan to spend about a thousand dollars more than their pre-pandemic average.

But vacation spending is only the beginning...

Older folks will renovate homes. They'll schedule medical procedures. And they'll impulse-buy lots of stuff.

So get ready... We're about to see what it looks like when two years of pent-up purchasing power floods into the economy. And it should be a powerful force behind stocks.

Good investing,

Sean Michael Cummings

Further Reading

The world is reopening. According to the signs we're seeing today, Americans are ready to reopen their wallets along with it. And that's great news for this industry... Read the full story here.

Investors are quick to lose confidence when the market pulls back. That's exactly what we saw in September of last year. But stock prices aren't the only measure of the economy's health... Get the full story here.

Market Notes
HIGHS AND LOWS

NEW HIGHS OF NOTE LAST WEEK

AbbVie (ABBV)… pharmaceuticals
Eli Lilly (LLY)… pharmaceuticals
Bristol-Myers Squibb (BMY)… pharmaceuticals
Palo Alto Networks (PANW)… cybersecurity
Chubb (CB)… insurance
Travelers (TRV)… insurance
W.R. Berkley (WRB)… insurance
Royal Gold (RGLD)… gold
Freeport-McMoRan (FCX)… diversified mining
Cheniere Energy (LNG)… natural gas
Black Stone Minerals (BSM)… natural gas
Nucor (NUE)… steel
Mosaic (MOS)… fertilizer
CF Industries (CF)… ammonia

NEW LOWS OF NOTE LAST WEEK

KB Home (KBH)… homebuilder
LGI Homes (LGIH)… homebuilder
Whirlpool (WHR)… home appliances
WD-40 (WDFC)… home-improvement products
Stanley Black & Decker (SWK)… tools and storage
Vicor (VICR)… power systems
Nuveen Municipal Value Fund (NUV)… muni-bond fund