I know you’re probably sick of hearing about AI and semiconductors. The hype is real. But while the talking heads on CNBC keep touting the AI revolution, they’re missing the forest for the trees. Because there’s a much more important economic indicator that’s flashing red… and it hits a lot closer to home for most Americans.
I’m talking about coffee. That’s right, your morning cup of joe is the real canary in the economic coal mine. And according to my good friend Rob Spivey over at Altimetry, the outlook is grim.
As Rob points out in his latest article, “Chips Can’t Keep Consumers Afloat”, consumer spending makes up over two-thirds of the U.S. economy. And right now, consumers are reeling in their spending as fast as they can. Rob cites a McKinsey report showing that “consumers expect to slow down spending across almost every other category in the next quarter.”
Even more concerning, Rob notes that “Even before McKinsey’s gloomy survey results, Starbucks was already giving us warning signs. U.S. same-store sales fell 3% in the second quarter. Transaction volumes fell 7%.”
Folks, this is a big deal. When people start cutting back on their daily latte, it means their wallets are hurting. Rob hits the nail on the head:
“The reason is simple… consumers are running out of money to spend. When money gets tight, people are forced to spend less and borrow more. That means higher credit-card balances, bigger auto loans, and more monthly payments.”
Rob Spivey
Just look at this chart from Rob’s article showing the spike in consumer loan delinquencies:
Credit card delinquencies jumping from 8.2% to 10.7% in a single quarter? That’s not just a red flag, that’s a five-alarm fire.
So while the AI hype machine keeps chugging along, propping up 60-70% of the stock market, the foundation of our economy is crumbling beneath our feet. Rob sums it up perfectly:
“But we can’t expect earnings growth to really accelerate when two-thirds of the U.S. economy – in other words, the U.S. consumer – is on the ropes.”
Rob Spivey
Look, I’m not saying to sell everything and hide your cash under the mattress. There are still opportunities out there (in fact, Rob’s boss Joel Litman is hosting a free broadcast tomorrow to reveal a hidden AI opportunity – click here to reserve your spot). But you need to be smart. Keep a close eye on the real indicators, like consumer spending and credit health.
Because at the end of the day, all the AI breakthroughs in the world won’t matter if Americans can’t afford their morning coffee.
Stay vigilant,
Market Monitor