Americans Are Sitting On $2.5 Trillion Savings Bomb

Issue 44

11.09.20 - A $2.5 trillion cash pile hoarded by consumers may be all it takes to drive the economic recovery from the COVID-19 pandemic, according to The Leuthold Group's chief investment strategist James Paulsen.

Consumers have increased their personal savings rate amid the pandemic as budgets were cut and spending out at places like restaurants and theaters declined significantly.

The savings rate surged to 35% as the economy went into a recession earlier this year, and now sits at 15%, which is still size percentage points significantly above its historical average. Once consumers are convinced that the economy is on good footing and its safe to get out and spend, economic growth should soar.

"More than $2.5 trillion of sidelined savings is the fuel for a growth bomb waiting to explode," Paulsen said, citing historical data.

Source: Bloomberg