Blackrock: 3 reasons we're not seeing a more convincing recovery

Russ Koesterich, the Chief Investment Strategist at Blackrock says “the reason we’re not seeing a more convincing recovery lies largely with the consumer. While firmer wages and lower gasoline suggest that the consumer has the ability to spend, what consumers lack is the propensity to spend. Instead of spending, more are saving. Since October, the U.S. savings rate has climbed by a full percentage point.” Koesterich says this trend is likely to continue because 1) The financial crisis left a serious scar on households confidence levels. “Looking at the aftermath of previous debt bubbles, Carmen Reinhart and Kenneth Rogoff found that the hangover is deep and long lasting. Growth was more than 1 percentage point lower relative to normal periods, and the average duration of the overhang was 23 years.” 2) Debt is still too high and “for most middle income households, the stock market rally has not materially impacted their sense of financial well-being.” 3) Families are under saved for an increasingly long retirement. (VIEW LINK)