Markets
In Charts: How American Household Finances are Changing
How American Household Finances are Changing
Visualizing shifts in income, savings, debt, and spending
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Every year, Silicon Valley patiently waits for Mary Meeker from Kleiner Perkins to share her famous Internet Trends report.
The latest rendition came out two days ago. As usual, the 294-slide deck is a treasure trove of the the latest data on technology and internet trends.
But while the report is well-known as a barometer on the internet, it also features some high-level data on the U.S. economy that we found interesting. As a result, we used some of the most compelling slides to put together this week’s chart on how American household finances are changing – and we greatly thank Mary for doing the heavy lifting.
From Peak to Peak
In 2007, real median household income had a local peak of $58,149, and then fell off a cliff at the same time as the credit cycle, which reached its own peak in 2008 Q3 as the financial crisis set in.
Real median household income bottomed in 2012, and then debt followed in 2013.
Looking at the most recent year of data available, both categories are now back above pre-crisis highs. Real median household income has now surpassed its all-time record in 1999 – and total household debt has topped $13 trillion in 2018 Q1, more than $500 billion higher than its previous peak in 2008.
A Closer Look
While consumer debt is similar in terms of total size from a decade ago, the composition has changed considerably.
Mortgage debt, which makes up the vast majority of consumer debt, is still actually down from its 2008 peak by 4%. Replacing that is other forms of debt, including student loans:
| Non-Housing Debt | 2008 Q3 ($T) | 2018 Q1 ($T) | Change |
|---|---|---|---|
| Credit Card | $0.86 | $0.81 | -6% |
| Auto Loan | $0.81 | $1.23 | 52% |
| Student Debt | $0.61 | $1.41 | 131% |
| Other Non-Housing Debt | $0.41 | $0.39 | -5% |
Note: it appears the data listed in this table is one quarter more recent than Meeker’s, which was represented in chart
Since 2008, student loan debt has surged by 131% – and auto loans by 52%. Mortgage debt, credit debt, and other non-housing debt have not yet crawled back to pre-crisis peaks.
Saving and Spending
Looking at the longer-term trend, Americans are borrowing more and saving fewer dollars.
In the 1970s, both rates were about the same as a percentage of income, falling in a range between 13-15%. Today, the savings rate is below 5%, and debt-to-annual income ratio has risen to 22%, according to Meeker.
What are American households spending money on?
| Category | 1972 | 1990 | 2017 |
|---|---|---|---|
| Shelter | 12% | 15% | 17% |
| Taxes | 15% | 9% | 15% |
| Transportation | 14% | 16% | 14% |
| Food | 15% | 15% | 12% |
| Household Operations | 11% | 12% | 11% |
| Pensions & Insurance | 7% | 8% | 10% |
| Healthcare | 5% | 5% | 7% |
| Entertainment | 6% | 5% | 4% |
| Apparel | 5% | 5% | 3% |
| Other | 9% | 9% | 8% |
Notably, households are spending more on shelter and healthcare – meanwhile, the cost for food, entertainment, and apparel are decreasing over time.
Markets
The Top Google Searches Related to Investing in 2022
What was on investors’ minds in 2022? Discover the top Google searches and how the dominant trends played out in portfolios.
The Top Google Searches Related to Investing in 2022
It was a turbulent year for the markets in 2022, with geopolitical conflict, rising prices, and the labor market playing key roles. Which stories captured investors’ attention the most?
This infographic from New York Life Investments outlines the top Google searches related to investing in 2022, and offers a closer look at some of the trends.
Top Google Searches: Year in Review
We picked some of the top economic and investing stories that saw peak search interest in the U.S. each month, according to Google Trends.
| Month of Peak Interest | Search Term |
|---|---|
| January | Great Resignation |
| February | Russian Stock Market |
| March | Oil Price |
| April | Housing Bubble |
| May | Value Investing |
| June | Bitcoin |
| July | Recession |
| August | Inflation |
| September | US Dollar |
| October | OPEC |
| November | Layoffs |
| December | Interest Rate Forecast |
Data based on exact searches in the U.S. from December 26, 2021 to December 18, 2022.
Let’s look at each quarter in more detail, to see how these top Google searches were related to activity in the economy and investors’ portfolios.
Q1 2022
The start of the year was marked by U.S. workers quitting their jobs in record numbers, and the effects of the Russia-Ukraine war. For instance, the price of crude oil skyrocketed after the war caused supply uncertainties. Early March’s peak of $125 per barrel was a 13-year high.
| Date | Closing Price of WTI Crude Oil (USD/Barrel) |
|---|---|
| January 2, 2022 | $76 |
| March 3, 2022 | $125 |
| December 29, 2022 | $80 |
While crude oil lost nearly all its gains by year-end, the energy sector in general performed well. In fact, the S&P 500 Energy Index gained 57% over the year compared to the S&P 500’s 19% loss.
Q2 2022
The second quarter of 2022 saw abnormal house price growth, renewed interest in value investing, and a bitcoin crash. In particular, value investing performed much better than growth investing over the course of the year.
| Index | Price Return in 2022 |
|---|---|
| S&P 500 Value Index | -7.4% |
| S&P 500 Growth Index | -30.1% |
Value stocks have typically outperformed during periods of rising rates, and 2022 was no exception.
Q3 2022
The third quarter was defined by worries about a recession and inflation, along with interest in the rising U.S. dollar. In fact, the U.S. dollar gained against nearly every major currency.
| Currency | USD Appreciation Against Currency (Dec 31 2020-Sep 30 2022) |
|---|---|
| Japanese Yen | 40.1% |
| Chinese Yuan | 9.2% |
| Euro | 25.1% |
| Canadian Dollar | 7.2% |
| British Pound | 22.0% |
| Australian Dollar | 18.1% |
Higher interest rates made the U.S. dollar more attractive to investors, since it meant they would get a higher return on their fixed income investments.
Q4 2022
The end of the year was dominated by OPEC cutting oil production, high layoffs in the tech sector, and curiosity about the future of interest rates. The Federal Reserve’s December 2022 economic projections offer clues about the trajectory of the policy rate.
| 2023 | 2024 | 2025 | Longer Run | |
|---|---|---|---|---|
| Minimum Projection | 4.9% | 3.1% | 2.4% | 2.3% |
| Median Projection | 5.1% | 4.1% | 3.1% | 2.5% |
| Maximum Projection | 5.6% | 5.6% | 5.6% | 3.3% |
The Federal Reserve expects interest rates to peak in 2023, with rates to remain elevated above pre-pandemic levels for the foreseeable future.
The Top Google Searches to Come
After a year of volatility across asset classes, economic uncertainty remains. Which themes will become investors’ top Google searches in 2023?
Find out how New York Life Investments can help you make sense of market trends.
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