My last two columns (found here and here) discussed eight lasting effects on the economy and financial markets of the Covid-19 pandemic. The final four are that U.S. households will continue to restrain spending and save robustly, there will be muted economic growth in the U.S. and abroad with a return to low inflation and interest rates, real commodity prices will resume their long-term decline and gains in equity prices will moderate.
The pandemic was a huge financial shock to many Americans. More than 16% of millennials didn’t have even $400 to cover emergencies, according to Federal Reserve surveys. So they saved 71% of the stimulus payments they received in June 2020, even more, 74%, of their December 2020 checks and still more, 75%, of the payments last March, according to the Federal Reserve Bank of New York. There’s little evidence that consumers plan to soon spend the $1.7 trillion in savings they’ve accumulated since early last year.
Gary Shilling's Guide to the Post-Pandemic Economy, Part 3 - Bloomberg
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