US Consumer Spending: The Engine Stalls, Wall Street Catches a Cold
Despite Nvidia's impressive results and an euphoric start to the session on November 20, the American markets abruptly turned red. Enguerrand Artaz, a strategist at La Financière de l’Échiquier, whose analysis is included in the provided document, identifies an unexpected culprit: not AI, but the weakening American consumer. This dual role of consumer-investor has been propping up the markets single-handedly for years.
The sudden downturn observed in US indices cannot be attributed solely to doubts surrounding artificial intelligence. In his analysis, Enguerrand Artaz notes that although Nvidia opened the session with a 5% surge, the index ended the day with a significant decline—one of the largest intraday reversals since Liberation Day, and before that, the COVID crisis.
The text highlights signals coming from consumer spending: disappointing results from Target and Home Depot, two barometers of domestic demand, indicate increasing fragility. Even Chipotle, typically accustomed to a loyal customer base and resilient growth, reports a decline in household spending. Several factors are listed in the document: persistent inflation, which is even rising again for certain goods; a weakening job market; and especially the resumption of student loan repayments, a direct budgetary shock for millions of Americans.
These accumulated headwinds are gradually eroding households' ability to spend. And when domestic demand slows down, the entire structure starts to crack, as consumption accounts for nearly 70% of the US GDP, as this analysis implicitly reminds us.
Retail investors: the weak link in a market
However, the deeper alarm concerns the role of individual investors. Over the past three years, these individuals have been a consistent support for the markets: systematically buying dips, making extensive use of leveraged ETFs, and showing enthusiasm for crypto assets and unprofitable tech stocks. The analysis by LFDE highlights a clear break in this behavior.
The most recent negative performances are affecting exactly the segments favored by individual traders: cryptocurrencies, Bitcoin-related stocks, and speculative tech small caps. Artaz explicitly mentions the pressure on leveraged ETFs, which are emblematic products for American individual investors. This sudden withdrawal could signal a structural change: in a market already lacking fundamental buyers, where quantitative funds only amplify existing movements, the absence of this marginal buying force can shift a market from a simple dip to a true correction phase.
The document emphasizes the psychological mechanics: the American consumer is not only the one filling the stores but also the one who, through their investment portfolio, creates a significant wealth effect. These two dimensions, consumer and investor, are closely linked. When the stock market rises, households spend more; when it falls, they pull back. The simultaneous pullback observed over the past few weeks thus acts as a double shock, accelerating short-term tensions.
The author notes that it is not possible to determine the cause and effect — whether low consumption is causing market declines, or whether market corrections are weighing on consumption — but their interaction constitutes the main short-term macroeconomic variable to monitor. He concludes that employment remains the key factor in the coming weeks: as long as the job market holds up, the deterioration could remain contained. Otherwise, a slowdown in consumption could become a systemic risk.
This content has been automatically translated using artificial intelligence. While we strive for accuracy, some nuances may differ from the original French version.
