Despite high inflation and supply chain issues, U.S. consumers are spending more while paying down their credit cards, according to Bank of America Corp. CEO Brian Moynihan.
Speaking with Bloomberg Television, Moynihan said that consumers are “in good shape” and will continue spending.
“You have consumers in good shape, not overleveraged,” he said, noting that consumers not only have more money than they did before the pandemic, but are also spending more.
“In the first two weeks of May, consumers spent 10% more than they did last May,” said Moynihan. “What’s going to slow them down? Nothing right now.”
The BofA chief also pointed out that “the unemployment rate is really low.”
The Federal Reserve is currently trying to battle record inflation, which has battered markets. Fears of a possible recession have been growing. But according to Moynihan, American consumers could help prevent that scenario.
“The Fed has this typically very difficult thing of getting them to slow down without slowing down too much,” he said. “I believe they are going to be able to manage this flow, but it’s going to be tricky.”
Buttressing Moynihan’s remarks are sales statistics for the 2021 holiday shopping season. While many investors are worried about inflation, sales during November and December were the best on record, growing 14.1% to an all-time high of $886.7 billion, according to the National Retail Federation.
This bodes well for the consumer staples sector. With consumer staples, investors can rely on a sector that can move with the peaks and valleys of the market. In other words, products that people want regardless of what the market or economy are doing.
“There’s admittedly a lot of uncertainty when it comes to consumer spending right now. However, consumer staples are one segment of the stock market that tends to be insulated from the broader challenges that face furniture retailers, restaurants, auto dealers or other operators,” wrote Jeff Reeves at Kiplinger. “While sometimes boring in their business model, these steady stocks can provide a strong foundation for any portfolio.”
The Invesco Dynamic Food and Beverage ETF (PBJ) holds 30 securities of the largest food and beverage companies, including grocery stores, which could benefit from rising food prices.
PBJ follows the Dynamic Food & Beverage Intellidex Index, which “is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value,” according to Invesco.
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