Bang for your buck

Question: What is the state of the consumer going into 2024?

Barbara Miller: We've seen consumer spending overall remain relatively strong in 2023 and consumer spending is important to the overall economy as it is generally about two thirds of GDP. But we've seen under the surface, a bifurcation in spending across different sectors and across different classes of consumers. Those with higher incomes remain more flush and able to weather the storm of higher inflation and higher interest rates. Whereas those in lower income echelons have more difficulty and have pulled back on a lot of discretionary purchases already. We'd expect to see these patterns continue into 2024 as inflation remains a bit sticky and until we have clarity on where interest rates are going.

Question: What consumer sectors and metrics should investors watch?

Barbara Miller: As we look to 2024 and where we see the most opportunity across the consumer sector, we'll look for what we always look for and that is companies, whether they're retailers or restaurants or product companies, that by virtue of creating product, enhancing brands, offering value are in turn creating demand and taking market share. So as we think about 2024, we continue to see opportunity in areas that have done well, athleisure, travel and experience related items. And to the extent that there's any hint of relief on the interest rate side, we could see some pickup in bigger ticket purchases over time. Another factor we think about and monitor as we think about overall consumer spending levels is employment. Employment levels have been healthy and continue to be, but we'll monitor any shifts there as we think about levels of spending across different sub-sectors because that is a critical factor in consumer confidence and ability to spend. As it relates to U.S. consumers, travel around the world has been very strong. There is a cohort of consumers elsewhere, particularly in China and other parts of Asia, that have not been traveling as heavily post-Covid. As that begins to change, it could fuel overall consumer spending, not only in the U.S. but across the world.