Talking Money and Markets During the Holidays
Impress friends and relatives with these insights on what's ahead for the economy
SOMETIME BETWEEN THE APPETIZERS AND THE PIE, even families who avoid third-rail topics like politics are bound to talk about money—where the economy is headed and what it means for their plans. “Economics is for everyone,” says Michelle Meyer, Head of U.S. Economics for BofA Global Research. “People want to know about the job outlook, what low interest rates might mean for them, and where prices are going.” Meyer, for one, is heading into the holidays with insights to offer her family members. Below, she’s happy to share them with you so that you can be the economic guru of your own family gathering when questions like these arise.
Talking Money and Markets during the Holidays with Michelle Meyer
Michelle Meyer
Head of U.S. Economics
BofA Global Research
Please see important information at the end of this program. Filmed on 12/12/2019
Michelle Meyer:
For most of us, the holidays are a time to gather around the table and enjoy great food with family and friends. As we do, it’s good to avoid the “so-called” third rail topics. Still, money and the economy are bound to come up. After all, economics is for everyone. People want to know about the jobs outlook. They want to know about interest rates and—most of all—they want to know what it means for them.
So take – for example – your niece; she’s looking for a new job. Is now the time to make a move?
Well, you could tell her that all signs point to continued growth in the jobs market. The U.S. unemployment rate is at the lowest level in 50 years1 and wages for job switchers are rising 1 percentage point faster than for stayers.2 So, if she’s set on making a break, now may be the time.
Say that your parents have retired and want to know how low interest rates may affect their savings.
Rates are at historic lows and we don’t see that changing very much. While that’s disappointing in terms of savings income, tell your parents this may be a good time to achieve goals that require borrowing. For example, maybe your parents may want to consider selling their existing home and move into that dream retirement house that they’ve been talking about.
What about your friend who says U.S.-China trade tensions can make your smartphone more expensive?
So far, tariffs haven’t directly affected consumer goods. But your friend is right to be concerned. Tariffs have hurt industries like manufacturing, and disputes over national security, Hong Kong and the race for tech dominance will continue. We expect a partial trade deal in the near future and a “ceasefire” through the U.S. presidential election. But don’t expect a quick resolution.
Now your sister, she’s working hard to pay off her personal loans, and she wonders why it’s okay for the government to keep piling up debt.
Well, your sister’s been careful and responsible with money. And across the country, household balance sheets are in good shape and consumers have largely spent within their means during this recovery. But government borrowing is at the highest level since the 1950s3 and it could create economic headwinds down the road. So tell your sister she’s setting a good example!
Someone at the table is bound to ask: What about the election? How will that affect the economy?
Okay, so we promised not to talk about politics, but without picking winners, let’s just recognize that elections do cause volatility. Businesses may delay new investments while awaiting results. And continued gridlock could prevent legislation from getting through. So despite other good economic news, the election remains a source of uncertainty.
I hope these ideas help you as you catch up with loved ones, and to talk about the economy. But, if the subject turns to Super Bowl predictions, you’re on your own.\
1. U.S. Bureau of Labor Statistics, Dec. 6, 2019 https://www.bls.gov/news.release/empsit.nr0.htm
2. Federal Reserve Bank of Atlanta, as of Dec. 12, 2019 https://www.frbatlanta.org/chcs/wagegrowth-tracker.aspx
3. U.S. Congressional Budget Office, as of Dec. 12, 2019 https://www.cbo.gov/about/products/budget-economic-data
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Your niece is itching for a new job opportunity. Is now the time to make the move?
“All signs point to continued growth in the job market,” Meyer says. The U.S. unemployment rate hit 3.5% in November—the lowest level in 50 years.1 Jobless claims are at historic lows and there are 1.2 job openings for every seeker.2 “Considering that wages for job switchers are rising 1 percentage point higher than for stayers,3 if your niece is set on making a change, now may be the time.”
Your parents just retired. How will low interest rates affect their savings?
Rates on savings accounts are tied closely to government bonds—and those fell during 2019. “We expect the Fed to stay on hold, keeping rates hovering at current levels,” Meyer says. While that’s disappointing for those looking for savings income, persistent low rates could make this a good time to fulfill other goals. For example, low borrowing costs could make this a good time for your parents to sell their existing home and move into the retirement house they’ve dreamed of.
"All signs point to continued growth in the job market. If your niece is set on making a change, now may be the time."
— Head of U.S. Economics for BofA Global Research
Is your friend right that U.S.-China trade tensions could make your smartphone more expensive?
“So far, the trade tensions haven’t directly affected most consumer goods,” Meyer says. But he’s right to be concerned. Tariffs have hurt industries such as manufacturing, and disputes over national security, Hong Kong and the race for technological supremacy will continue. Look for a “ceasefire” at least through the U.S presidential election but without a final resolution.
Your sister asks: I’m working hard to pay off my home and education loans—why is it okay for the government to keep piling up debt?
If she’s like most U.S. consumers, your sister has been careful and responsible with money. “Household balance sheets are in good shape and consumers have largely spent within their means during this recovery,” Meyer says. Businesses, too, have moderated spending in recent years. Meanwhile, government borrowing is at the highest levels since the postwar 1950s.4 “This could create economic headwinds down the road.” While paying off life’s debts is never easy, credit your sister with setting a good example.
Someone had to ask: How will the election affect the economy?
Okay, we promised not to talk about politics. But without picking winners, it’s important to recognize that elections do cause market volatility. Businesses may delay new investments while awaiting results, Meyer notes. Congressional gridlock could prevent legislation from getting through. Despite other positive economic signs for 2020, “the election remains a source of uncertainty.”
For all of her insights, Meyer concedes there are some family holiday debates where she can’t help. “When the subject turns to Super Bowl predictions, you’re on your own. We are an Eagles family and remaining hopeful.”
For more on the markets in the coming year, read A Holiday Guide: What to Tell Your Family About the Economy and Outlook 2020: 7 Key Questions Answered
1 U.S. Bureau of Labor Statistics, Dec. 6, 2019 https://www.bls.gov/news.release/empsit.nr0.htm
2 U.S. Department of Labor, Dec. 12 2019 https://www.dol.gov/ui/data.pdf
3 Federal Reserve Bank of Atlanta, as of Dec. 12, 2019 https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx
4 U.S. Congressional Budget Office, as of Dec. 12, 2019 https://www.cbo.gov/about/products/budget-economic-data
Past performance does not guarantee future results.
Investments should consult with their personal advisors for investment advice.
Bank of America Private Bank does not predict any increase or decrease in interest rates.
BofA Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).