Over the past decade, the personal savings rate (PSR) has averaged 7.6%; that is Americans’ have been saving on an after-tax basis just over $1 trillion, until #covid19. In March, folks became increasingly defensive in combating the unknowns associated with the invisible enemy, by instantaneously cutting spending and tightening their belt. The PSR has nearly doubled to 12.7%. By April, with the pandemic in full-force, saving became the next normal, as folks saved like never before; the rate of after-tax savings skyrocket to an unheard $6.1 trillion, or 33%! Why? Because humans have innate survival instincts, and whenever fear reigns supreme people hunker down and play it smart.
Is this next normal having an effect on the financial markets? Yep. When will the PSR revert back to its mean, or will the next normal PSR remain elevated above its historical trend?
