“It’s tough to make predictions, especially about the future” – Yogi Berra
Mainstream economic theory has taken a beating in recent years. Sophisticated tools (rules) that were developed to forecast relatively small changes in economic conditions have been unreliable with the extreme changes the world has faced since the onset of COVID. For instance, the Index of Leading Economic Indicators has been flashing a recession warning since late 2021, a period where the US experienced strong economic growth.
In our most recent quarterly meetings, we have presented clients with a few metrics that are signaling a cautionary outlook. In “good” times, consumers have the luxury of buying more of the things they want whereas in “bad” times, spending is limited to things they need. In recessions, history shows a strong shift between wants and needs, or between discretionary and nondiscretionary purchases. The challenge is in finding real-time data that reflects these preferences.
The VISA Momentum Index tracks aggregate spending across traditional retail and ecommerce. Signals above 100 indicate strengthening while readings below 100 indicate weaking. As we have highlighted in the past, the Momentum index has remained below 100 since early 2023. And while recent reports show an upward trend, non-discretionary items (needs) are leading the way.
Forecasting is difficult and relying on a single indicator will most likely yield poor results. The VISA Momentum Index is no different. Comperio clients receive a mosaic view with highlights from dozens of relevant economic data. Contact your consultant to learn more.
Comperio Retirement Consulting has been named one of the largest 100 Investment Consultants in the United States according to Pension & Investments (P&I) for the past 7 years