A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
YOLO economy, meet the “yo, no” economy.
Not so long ago many of us were willing, if not eager, to shell out on fancy new TVs, upgraded bathrooms and kitchens, Peloton bikes and bottles of the good stuff. Things have changed. This summer, our bathrooms are outdated and our champagne bottles corked.
Americans emerged from pandemic lockdowns with better jobs, extra spending money and a burning desire to live life outside of the confines of their own abodes, regardless of the price. In what was dubbed the YOLO economy (short for “you only live once”), or revenge spending, consumers shelled out for the experiences and goods they had missed.
“Covid showed all of us that life doesn’t go on forever,” Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute, told Before the Bell. “Preparing for a retirement that’s way off into the future and could be interrupted by something like a global pandemic changed our mindsets. People wanted to live in the moment.”
Now, five years after the onset of the pandemic, the free-spending party is coming to an end. And that may be bad news for the economy.
What’s going on: Consumer spending is falling back to earth, and even the highest-income Americans are turning to discount retailers like Walmart. Target is slashing prices to lure reluctant shoppers back into their stores, and sweet-treat shops like Starbucks have reported that sales aren’t growing like they used to be — a Frappuccino no longer feels like a necessary expense.
So what’s happening? Inflation is still elevated and consumers are running out of their Covid-era savings, the job market is beginning to tighten and workers are getting worried about losing their jobs.
There’s also another explanation: Americans have gotten their post-Covid ya-ya’s out and are ready to tone things down again.
“There is an element of ‘how long can I live in this PTSD post-Covid environment?’” said Samana. “At some point you do have to figure out what the new normal looks like. Employers want workers back more often in the office and in certain locations, you can’t work from anywhere anymore, that’s also changing mindsets. There’s this sense of reversion to the mean.”
Well, they’re paring back in some areas. People are still willing to shell out for Taylor Swift concerts and plane tickets. Memorial Day travel was at its highest level in history, according to the TSA. But that means people are paring back their discretionary purchases and looking to trade down in everyday necessities, too.
What it means: We’ve written extensively at Before the Bell about how consumer spending saved the US economy from recession in the high-inflation and interest rate years following the pandemic.
And it still continues to be the most important measure of a strong economy — spending accounts for about 70% of gross domestic product, the go-to measure of US economic health.
So if that slows, that would be bad news and could potentially trigger the recession that economists began warning about way back in 2021. (Don’t worry, most economists at major banks and firms don’t predict that will happen anytime soon, and if it does happen, it might be not be a slowdown for everyone.)
It’s also rattling markets and keeping investors on edge — the Dow dropped more than 1,000 points between Tuesday and Thursday last week on unexpected economic data. It dropped another 115 points on Monday after a report showed that the manufacturing industry had contracted slightly.
“There’s really no indication that all of the factors weighing on the consumers’ mind are going to ease up anytime soon,” said Samana.
What comes next: These next two weeks will be important for investors, consumers and general economy-watchers. Official jobs data for the month of May will be released on Friday and analysts will pore over the numbers for hints about whether the labor market will continue to loosen.
Next week, the Federal Reserve holds its policy meeting where officials will also release their outlook for employment, inflation and interest rates in the months to come. It’s highly unlikely that we’ll see any change in interest rates at that meeting, but Fed Chair Jerome Powell could provide some guidance on when the central bank expects to begin its pivot.
The New York Stock Exchange suffered a bizarre glitch on Monday
The New York Stock Exchange said Monday that a technical issue that halted trading for some major stocks and caused Berkshire Hathaway to be down 99.97% has been resolved.
In an update, NYSE said impacted stocks have reopened and “all systems are currently operational.”
Intercontinental Exchange, the parent company of NYSE, has found no indication the glitch was caused by a cyberattack, a senior executive at a major bank in touch with ICE told CNN.
Instead, an NYSE spokesperson said there was a “technical issue” with industry-wide price bands that “triggered” trading halts on up to 40 symbols listed on NYSE Group exchanges.
NYSE noted that those price bands are published by the Consolidated Tape Association’s (CTA) Security Information Processor (SIP). CTA, an industry group, is responsible for publishing real-time trade and quote data.
Dozens of stocks were paused earlier in the day, an indication they traded outside those so-called limit up-limit down bands, according to NYSE’s website. That list includes Chipotle and Berkshire Hathaway, the holding company run by legendary investor Warren Buffett.
For nearly two hours, Berkshire Hathaway’s Class A shares were listed as trading at just $185.10 — a price that would represent a loss of 99.97%. Berkshire closed at $627,400 on Friday.
NYSE announced it has decided to “bust,” or cancel, all “erroneous” trades for Berkshire between 9:50 am ET and 9:51 am ET at or below $603,718.30. The exchange said that ruling is not eligible for appeal and indicated it could cancel other trades.
“We are monitoring the issue and engaging with market participants,” a spokesperson for the Securities and Exchange Commission told CNN.
Joe Saluzzi, co-founder of Themis Trading, told CNN that the NYSE’s explanation is hard to square with the bizarre trades that hit the tape.
“I’m not buying that explanation. That doesn’t make any sense to me,” said Saluzzi, a market structure expert and author of “Broken Markets.”
Read more from CNN’s Matt Egan here.
GameStop shares gain after meme stock influencer reveals $116 million bet
Shares of GameStop climbed 21% on Monday as the renewed frenzy around meme stocks shows little sign of abating.
The video game retailer’s stock soared hours after a Reddit post by stocks influencer Keith Gill — also known as “Roaring Kitty” — revealed that he had bought nearly $116 million worth of the stock. GameStop’s stock surged as much as 75% earlier in the day before parings its gains.
The post was the first on Gill’s Reddit account in more than three years, when social media-fueled hype around GameStop (GME) shares was in full swing.
Meme stocks are shares that swing wildly in value based on their popularity among trader communities on social media rather than the companies’ fundamental characteristics. The frenzy started with GameStop in 2021, extending to other companies such as AMC Entertainment (AMC) and Bed, Bath and Beyond, which has since filed for bankruptcy.
Shares of AMC Entertainment were up 11.1% on Monday.
