We Won't See a Recession Until This Reverses

"You can't have a recession if everyone has a job and everyone is spending money," I told the audience in Las Vegas.

We hosted our annual Stansberry Conference last month. And I had the honor of sharing my most up-to-date thoughts on the markets and the economy.

Everyone is still on edge, waiting for a recession to take hold in the U.S. Many of our analysts at Stansberry Research are exploring the possibility, too.

It's good to be prepared. But you shouldn't lose sleep over this fear. The reason why is as simple as what I said in Vegas...

Consumer spending accounts for roughly two-thirds of the U.S. economy. So a major slowdown isn't likely if people have jobs and cash to spend.

Importantly, folks have more cash on hand right now than you probably realize. And until that changes, a recession is unlikely from here.

Let me explain...

Spending money is as American as baseball or apple pie. It keeps the economy humming... And folks simply won't stop spending until they're out of cash.

The pandemic stimulus pushed thousands of dollars into the average American's bank account. It's what kept us from falling into a much more painful and prolonged recession in 2020. But now, the narrative in the financial media is that most people have spent all their savings.

That couldn't be further from the truth.

We can see it by looking at checkable deposits. These represent the total cash held in checking, savings, and money-market accounts here in the U.S.

Specifically, we're looking at the personal-sector checkable deposits. This is money held by households, nonprofit organizations, and nonfinancial, noncorporate businesses. You can think of it as cash that individuals and small businesses have on hand.

If the economy were about to crash, we'd expect these folks to be hurting. But the numbers don't lie. And today, they tell us that Americans are holding a near-record amount of cash... trillions of dollars more than before the pandemic. Take a look...

This group had less than $2 trillion at their disposal before the pandemic. Today, that figure has soared to nearly $5 trillion.

Now, it is true that the figure has dropped by a few hundred billion from last year's high. But it still amounts to trillions of dollars in excess cash, versus just a few years ago. And that means consumers will keep spending... heading off a potential recession.

Another interesting detail is that it isn't just the wealthiest consumers holding that extra cash. The most well-off do have a majority of these savings. But even the less well-off are in a much better position than they were before the pandemic. Take a look...

This chart shows the checkable deposits for the bottom 50% in overall wealth. These folks have nearly $300 billion in cash available. That's a staggering amount – triple what they had before the pandemic began.

Both charts tell the same story... The average American has plenty of cash on hand right now. Consumers will be able to keep spending. And it's hard to have a recession if everyone is spending money.

Sure, that situation can't last forever. But it's the reality for now – and it isn't something that will change overnight. So while everyone is worried about an economic downturn, remember... it probably won't happen until this excess cash disappears.

Good investing,

Brett Eversole

Further Reading

No single indicator is enough to tell you when a downturn is imminent. One example is the inverted yield curve. This measure is thought to be a powerful recession signal – but it can give false positives from time to time. And today, it's starting to look like the boy who cried wolf... Learn more here.

"Instead of falling over themselves to invest, everyone is looking for reasons not to act," Brett writes. It's the opposite of an investment mania – and when everyone is this scared, it usually pays to go against the crowd. Right now, a key sentiment index shows just how fearful folks have become... Read more here.