News
YOLO is dying. This could be bad news for the economy
A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
CNN New York –
YOLO Economy, get to know the “yo, no” economy.
Not long ago, many of us were willing, if not eager, to shell out for extravagant things. new televisions, updated bathrooms and kitchens, Peloton Bikes It is bottles of good things. Things have changed. This summer, our bathrooms are outdated it is ours corked champagne bottles.
Americans emerged from pandemic lockdowns with better jobs, extra spending money and a burning desire to live outside the confines of their own homes, no matter the price. In what has been dubbed the YOLO economy (short for “you only live once”), or revenge spending, consumers have shelled out for the experiences and goods they missed out on.
“Covid has shown us all that life doesn’t last forever,” Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, told Before the Bell. “Preparing for a reform that is very far in the future and that could be interrupted by something like a global pandemic has changed our mindset. People wanted to live in the moment.”
Now, five years after the start of the pandemic, free spenders party is coming to an end. And that could be bad news for the economy.
What is happening: Consumer spending is falling back to earthand even higher-income Americans are turning to discount retailers like Wal-Mart. The target is reducing prices to lure reluctant shoppers back into their stores, and candy stores like Starbucks reported that sales aren’t growing like they used to — a Frappuccino no longer seems like a necessary expense.
So, what is happening? Inflation is still high and consumers are running out of its Covid era savings, the job market is starting to tighten and workers are increasingly worried about the possibility of losing their jobs.
There is also another explanation: Americans got their post-Covid experience yes you are out and are ready to smooth things over again.
“There’s an element of ‘how long can I live in this post-Covid PTSD environment?’” Samana said. “At some point you have to figure out what the new normal will look like. Employers want workers to return to the office more often and in certain locations, it is no longer possible to work from anywhere, which is also changing mindsets. There’s this feeling of reversion to the mean.”
Well, they are decreasing in some areas. People are still willing to pay for Taylor Swift concerts and plane tickets. Memorial Day Trip it was at its highest level in history, according to the TSA. But this means that people are reducing their discretionary purchases and looking to reduce their daily needs as well.
What it means: We have written extensively in Before the Bell about how consumer spending saved the US economy from recession in the years of high inflation and interest rates that followed the pandemic.
And it remains the most important measure of a strong economy – spending represents about 70% of gross domestic product, the benchmark measure of U.S. economic health.
So if that slows down, that would be bad news and could potentially trigger the recession that economists began warning about in 2021. (Don’t worry, most economists at major banks and companies Don’t predict this will happen soon, and if that happens, it may not be a slow down for all.)
It’s also shaking up markets and keeping investors nervous – the Dow Jones fell more than 1,000 points between Tuesday and Thursday last week due to unexpected economic data. It fell another 115 points on Monday after a report showed the manufacturing industry had contracted slightly.
“There’s really no indication that all the factors weighing on consumers’ minds are going to ease anytime soon,” Samana said.
What comes next: The next two weeks will be important for investors, consumers and observers of the economy in general. Official employment data for May will be released on Friday and analysts will pore over the numbers for clues as to whether the job market will continue to ease.
Next week, the Federal Reserve will hold its policy meeting, where officials will also release their outlook for employment, inflation and interest rates in the coming months. It is highly unlikely that we will see any change in interest rates at this meeting, but Fed Chairman Jerome Powell could provide some guidance on when the central bank expects to begin its pivot.
The New York Stock Exchange said Monday that a technical issue that halted trading in some major stocks and caused Berkshire Hathaway to fall 99.97% has been resolved.
In an update, the NYSE said the affected stocks have reopened and “all systems are currently operational.”
Intercontinental Exchange, parent of the NYSE, found no indication that the failure was caused by a cyberattack, a senior executive at a major bank in contact with ICE told CNN.
Instead, an NYSE spokesperson said there was a “technical issue” with industry-wide price ranges that “triggered” trading halts on up to 40 symbols listed on NYSE Group exchanges.
The NYSE noted that these price ranges are published by the Consolidated Tape Association’s (CTA) Security Information Processor (SIP). CTA, an industry group, is responsible for publishing real-time trading and quote data.
Dozens of stocks were paused earlier in the day, an indication that they were trading outside so-called bull and bear ranges, according to NYSE website. That list includes Chipotle and Berkshire Hathaway, the holding company run by legendary investor Warren Buffett.
For nearly two hours, Berkshire Hathaway Class A shares traded at just $185.10 – a price that would represent a 99.97% loss. Berkshire closed at $627,400 on Friday.
The NYSE announced that it has decided to “break” or cancel all “erroneous” Berkshire trades between 9:50 a.m. ET and 9:51 a.m. ET worth $603,718.30 or less. The exchange said the decision was not subject to appeal and indicated it could cancel further trading.
“We are monitoring the issue and engaging with market participants,” a Securities and Exchange Commission spokesperson told CNN.
Joe Saluzzi, co-founder of Themis Trading, told CNN that the NYSE’s explanation is difficult to reconcile with the bizarre trades that made it onto the tape.
“I don’t believe this explanation. That doesn’t make sense to me,” said Saluzzi, a market structure expert and author of “Broken Markets.”
Read more from CNN’s Matt Egan here.
GameStop shares rose 21% on Monday on renewed frenzy around meme stocks shows little sign of abating.
The video game retailer’s shares soared hours after a Reddit publish by stock influencer Keith Gill – also known as “Roaring Kitty” – revealed that he had purchased nearly $116 million worth of shares. GameStop shares rose as much as 75% earlier in the day before paring their gains.
The post was the first on Gill’s Reddit account in more than three years, when hype fueled by social media around GameStop (GME) the actions were in full swing.
Meme stocks are stocks whose value fluctuates wildly based on their popularity among trading communities on social media rather than the fundamental characteristics of the companies. The frenzy started with GameStop in 2021, extending to other companies as AMC Entertainment (AMC) and Bed, Bath and Beyond, which has since Filed bankruptcy.
AMC Entertainment shares rose 11.1% on Monday.