YOLO's decline could potentially harm the financial sector.
This story was first published in the CNN Business' Before the Bell newsletter. You can subscribe to the newsletter here. For an audio version, you can click the link provided as well.
Not too long ago, people were ready to spend their money on fancy new TVs, luxurious bathrooms, and kitchen upgrades, expensive exercise bikes like Peloton, and nice bottles of champagne. But times have changed. This summer, our bathrooms are old-fashioned, and the champagne is corked.
After the pandemic lockdowns, Americans emerged with better jobs, extra money, and a strong desire to live life outside their homes, disregarding the cost. This was known as the "YOLO" economy (which stands for "you only live once") or "revenge spending," where consumers bought products and experiences they had missed.
"Covid taught us that life doesn't go on forever," Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute, told Before the Bell. "Preparing for a retirement that's far in the future and might be interrupted by a global pandemic changed our perspectives. People wanted to enjoy the moment."
Now, five years after the pandemic, the party is winding down. And that could have negative consequences for the economy.
Consumer spending is starting to fall back to normal levels, even for the higher-income Americans. Everything from expensive items to daily necessities is seeing a decline in sales. Walmart is seeing more customers, while retailers like Target are slashing prices to bring in shoppers. Even Starbucks, known for its coffee treats, isn't seeing the growth it used to.
So what's happening? Inflation is still very high, and people are running out of their pandemic savings. Unemployment is starting to become more of a concern. In addition, there's a feeling of "how long can I live in this COVID-induced stress?" asking for a change in the way of living.
"There is an element of 'how long can I live in this PTSD post-Covid environment?'" Samana said. "Eventually, you have to decide what the new normal is going to be. Employers want workers back more often in the office now, so it's changing people's minds. There's this sense of 'going back to normal.'"
Some people are still spending on concerts and plane tickets, but most are cutting back their discretionary expenses.
Why does this matter? We've written extensively in Before the Bell about how consumer spending saved the US economy from recession during the costly years following the pandemic. It's the most important measure of a strong economy – spending makes up about 70% of Gross Domestic Product (GDP).
So, if consumer spending starts to slow down, it might cause a recession. Economists predicted that might happen way back in 2021, and although most major banks and firms don't expect it to happen anytime soon, if it does, it may not affect everyone equally.
The markets are also responding nervously to this slowdown. The Dow dropped more than 1,000 points between Tuesday and Thursday last week due to surprising economic data. It dropped another 115 points on Monday after a report showed that the manufacturing industry had contracted.
And this trading halt also worried investors.
"There's really no indication that all the factors impacting consumers' minds are going to ease up anytime soon," Samana said.
Over the next two weeks, investors and the general public are watching closely for signs of economic health. The day after next week, official employment figures for May will be made public, and analysts will be looking for clues about the job market's future. The following week, the Federal Reserve will hold its policy meeting, where officials will give their outlook for employment, inflation, and interest rates.
The NYSE experienced a bizarre glitch on Monday that temporarily stopped trading for some major stocks, causing Berkshire Hathaway's stock prices to plummet by 99.97%. NYSE said the issue has been fixed, and impacted stocks are now operational. Intercontinental Exchange, the parent company of NYSE, has found no evidence of a cyberattack causing the error.
NYSE said there was a "technical issue" with industry-wide price bands that "triggered" trading halts on up to 40 symbols listed on the NYSE Group exchanges. These price bands are published by the Consolidated Tape Association's (CTA) Security Information Processor (SIP). CTA, an industry group, is responsible for publishing real-time trade and quote data.
Numerous stocks were suspended earlier in the day, suggesting they traded beyond the limit up-limit down zones, based on NYSE's website. The list includes Chipotle and Berkshire Hathaway, the holding company helmed by renowned investor Warren Buffett.
Berkshire Hathaway's Class A shares were traded at just $185.10 for around two hours - which amounts to a staggering 99.97% loss if accurate. Berkshire closed with a market value of $627,400 on Friday.
NYSE declared to nullify, or cancel, all "erroneous" trades for Berkshire in the time frame of 9:50 am ET to 9:51 am ET at or below $603,718.30. The authority stated its decision can't be contested and suggested it might cancel other trades.
A representative for the Securities and Exchange Commission told CNN they're observing the problem and are in touch with market players.
Joe Saluzzi, co-founder of Themis Trading, expressed his skepticism toward NYSE's explanation.
"I'm not buying that explanation. That doesn't make sense to me," Saluzzi, a market structure expert and author of "Broken Markets," stated.
CNN's Matt Egan has more insights.
GameStop shares surge after meme stock enthusiast exposes an $116 million wager
GameStop's stock saw a 21% increase Monday, indicating the craze surrounding meme stocks remains unabated.
The video game store's share price skyrocketed following a Reddit post by stocks influencer Keith Gill. He disclosed that he had purchased $116 million worth of GameStop shares. For a brief moment earlier in the day, the stock spiked by 75%, only to stabilize later.
It's worth mentioning that Gill's most recent Reddit post was from around three years ago, during the previous peak of the hype surrounding GameStop shares.
Meme stocks exhibit extreme volatility in value because of their popularity in social media trader communities rather than the actual characteristics of the companies involved. The craze initially started with GameStop in 2021, eventually spreading to other companies like AMC Entertainment and Bed, Bath, and Beyond, which eventually filed for bankruptcy.
MoneyGram, which was a target for meme stock followers in recent weeks, exhibited a 6.3% increase in trading price on Monday.
CNN's Anna Cooban supplied additional information.
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In light of the potential economic slowdown due to decreasing consumer spending, investors are closely watching for signs of recovery. This could potentially impact the financial sector, as robust consumer spending is crucial for a strong economy. Additionally, some individuals are still investing in experiences like concerts and travel, showing that while discretionary spending may be decreasing, some individuals are still committing funds to certain sectors, such as tourism or entertainment.
