Goldman Sachs tells clients: Shorting the American middle-class consumption
Goldman Sachs believes that the middle class and lower-income consumers are a major risk factor dragging down the US economy. This large consumer group is facing significant pressure from inflation and reduced cash inflows, causing their disposable income and consumption capacity to be severely impacted
Although US economic data has not shown a clear slowdown yet, the keen sense of smell of Goldman Sachs has already detected the pressure on American consumers and quietly started preparing for short positions.
In their latest report, Goldman Sachs analyst team led by Louis Miller pointed out that the major risk factor dragging down the US economy is the middle class and lower-income consumers. This vast consumer group is facing tremendous pressure from inflation and reduced cash inflows, with their disposable income and spending power severely impacted.
Last month, Goldman Sachs advised clients to short stocks related to low-income consumers in their report, and now the list of stocks to short has expanded to include those related to middle-class consumers.
Louis Miller believes that several factors are squeezing the consumption power of the middle class: first, the rise in actual tax rates at the beginning of this year has reduced disposable income flow; second, the reduction in actual tax refunds; third, first-quarter inflation rebounded beyond expectations, further squeezing actual income and expenditure growth.
In addition to the trading department led by Louis Miller, Goldman Sachs' consumer retail director Kate McShane also emphasized in a recent report that compared to other groups, middle-income consumers face the greatest pressure, with higher financial debt and lower mortgage equity withdrawal suppressing cash inflows for this group.
The Goldman Sachs report also mentioned that several large consumer companies have issued warnings of weak consumer activity in their recent quarterly reports. For example, McDonald's first-quarter revenue fell short of expectations due to consumers being more "cautious" about spending; 3M expects continued weakness in retail non-essential spending; Coca-Cola management noted that low-income consumers are shifting more towards cheaper options.
It is worth noting that the debt levels of Goldman Sachs' middle-class consumer-related targets are significantly higher than the overall consumer sector, indicating that these companies will not only face income slowdown but also higher interest expenses due to rising interest rates. Goldman Sachs has previously warned that companies with high debt levels will face greater risks