2022 was tough for those who were investing. So many factors have worsened and the outlook for 2023 is not looking any better. While a lot of investors think the worst is behind us, it might actually be in front of us, according to a Twitter thread from HOZ, a well-known trader in the Twitter space.
Massive decline in consumer spending
People have become extremely cautious in their spending in 2022. High inflation and interest rates made people tighten their belts as the cost of living skyrocketed. In fact, consumer sentiment fell to levels unheard of. Yes, to record lows.
Low spending means lower profits for companies, which will grow at a slower pace as a result. In the short term, we may see more pain coming to risk-on assets like stocks and crypto. However, it’s a good sign for those who are willing to withstand the storm and start investing when the sentiment improves.
Consumer sentiment chart, source: link
Savings rate close to 2008 levels
Another worrying factor, according to HOZ, is the very low savings rate. He goes further, claiming, “Many individuals and households are currently one payment away from bankruptcy.” The savings rate fell the sharpest in decades as the aforementioned cost of living surged.