From FT Alphville:
Citigroup’s chief US equity analyst,Tobias Levkovich, is not a natural bear. Up until October 8th, he was the most bullish of 9 senior market strategists tracked by Bloomberg - he’s now the least optimistic.
Highlights from his latest missive on US consumer spending:
…higher-end consumers have a disproportionate impact on consumption activity. In particular, roughly 20% of Americans own an estimated 90% of stocks and thus the recent plunge in stock prices has wiped out as much as $8 trillion of US equity market value since mid-2007. In addition, job losses, which are expected to continue, are having a detrimental impact on consumer purchases.
As a reminder, that top 20% of American income earners account for roughly 40% of US consumer spending and more than the bottom 60% of income earners combined, making them an integral and influential part of the consumption society that accounts for roughly 71% of GDP.
The central argument of the note (with certain caveats) is that the negative wealth effect of declining stockmarkets has been underestimated....
And because we love a good chart here on FT Alphaville, here’s Citi’s Living Large index: