Ninety-nine percent of Americans will have less money in the bank by mid-2024 than they did before the pandemic — as inflation and high interest rates eat into their savings, JPMorgan analysts say
- Many Americans have been able to save thousands of dollars during the pandemic
- High interest rates have led to expensive car loans and credit card payments
- JPMorgan predicts that 99% of American savings will be gone by June
By mid-2024, about 99 percent of Americans will be less well off financially than before Covid, JPMorgan analysts predict.
A new report from the bank shows that by June 2024, all but the richest one percent will have run out of savings they could build up during the pandemic.
Many families were able to save thousands of dollars during the pandemic because they worked from home — not having to pay for a commute or to buy lunch near the office — and received federal Covid relief payments.
Normally, Americans increased their savings by a fifth. That means anyone who has, say, $20,000 in the bank has increased it to $24,000.
These savings have used the extra money for 80 percent, according to the research note published on Thursday by JPMorgan market strategist Marko Kolanovic.
By mid-2024, about 99 percent of Americans will be less well off financially than before the corona crisis, JPMorgan analysts predict. Pictured is a customer at a grocery store in San Anselmo, California – food and drink prices have skyrocketed in the past two years
A research note written by JPMorgan market strategist Marko Kolanovic (pictured) shows an economic downturn and likely recession are expected next year
High interest rates this year led to higher credit card and car loan payments, completely eroding the savings of many Americans. And according to the note, the vast majority of those who still have some reserves are likely to run out of them soon.
Families are also paying more for food and groceries after rampant inflation.
JP Morgan’s analysis mirrors findings from a separate September report — which also found that Americans have less cash on hand than before the pandemic.
Kolanovic argued that the money struggle Americans face next year would likely be intertwined with a recession, which many economists had previously predicted would happen this year.
On the plus side, Kolanovic said that because Americans are locked into mortgages with low interest rates, defaulting on home loans would be less of a problem.
Although the outlook for 2023 was initially bleak, the economy averted a recession thanks to strong consumer spending and the positive performance of the US stock market.
Kolanovic attributed some of the market performance to investors taking money out of Chinese markets and investing in the US instead.
A handful of technology stocks have also boosted the performance of the economy as a whole, many of which are in the artificial intelligence (AI) sector.
He also suggested that inflation allowed many major US companies to keep profits high because they were able to generate higher revenues despite lower sales.
The bank attributed some of the US stock market performance to investors taking money out of Chinese markets and investing in the US instead. Pictured is the head office in London
“Inflation has played a major role in maintaining corporate profits, which in many cases have been achieved by selling fewer units at higher prices or through cost cutting,” the note said.
“We think that the decline in inflation and economic activity that we forecast for 2024 will at some point worry or perhaps even panic investors.”
As a result, economists at JPMorgan predict that the Federal Reserve will begin tapering interest rates in the second half of next year, possibly at a rate of 0.25 percent per policy meeting, the report said.
The analyst wrote: “U.S. 10-year bond yields are expected to fall to 3.75 percent in the coming year if there is a gradual economic slowdown, and even more if the economy slides into recession.”