Pandemic Savings Depleted: Risk to S&P 500 Profits

The San Francisco Fed reports that excess pandemic savings have been fully spent, with the balance turning negative in March, signaling a potential headwind to consumption and corporate profits. Real wage growth is slowing, overall savings are falling, and real disposable income growth is decelerating, potentially leading to weaker consumption in the coming months.
Economists warn that relying on credit cards and non-pandemic savings to sustain consumption may not be sustainable due to elevated borrowing costs and rising delinquencies. The savings rate is nearing its lowest level in over a decade.
While retail sales rebounded strongly in March after a slowdown in the first quarter, economists are forecasting a potential slowdown in April. A stumbling consumer could pose a significant risk to risk assets and the profit recovery in the S&P 500, as well as serve as a reality check to the credit market.