Apparently for the first time since sometime in the Truman Administration, Americans actually paid down household debt last quarter. Of course the total debt load is still growing, no doubt due to the interest expense, but the turnaround has been shocking for economists. Goldman’s chief U.S. economist, Jan Hatzius is quoted in the article as saying “We’ve never seen a pullback like this.”
The U.S. consumer accounts for approximately 17% of world GDP and U.S. consumers are cutting back spending and trying to live within their means for a change. Unless there is big offsetting spending from somewhere else, profit growth is not going to come from revenue growth. If it is uncharted territory for economists, it’s very likely their forecasts will be a long way off the mark too. It seems safer to use an adaptive, systematic method like relative strength to deal with the markets than hope all the gurus guess correctly.
