MORGAN STANLEY WARNS: Americans are starting to do 'dumb things' with their money

It’s a boom.

And now US consumers are starting to do silly things with they money.

In a press briefing on Tuesday, Mike Wilson, chief investment officer of Morgan Stanley wealth management, said consumer behaviour is starting to show signs of excess as the economic recovery reaches its later stages.

Wilson said the US economy is finally “self-sustaining,” with the Federal Reserve gearing up to raise interest rates as soon as this year after several years of emergency interventions.

And now, mid-expansion, Wilson says consumers are starting to really act like it.

Here’s Wilson (emphasis added):

“Consumers are feeling
pretty good, and they are starting to spend money again, and they’re starting to do dumb things. They’re starting to borrow money, they’re starting to maybe buy that house they shouldn’t or that car they shouldn’t.

Wilson cited three things that are encouraging consumer confidence.

First, the unemployment rate is at a six year low, at 5.1%. And even though wage growth has been relatively sideways, there are more jobs available. Second, household formation is rising. Lastly, consumers are starting to believe that gas prices will be lower for longer, and as a result, increasing spending.

However, this boom is equally a warning sign that we are approaching the point where everything starts heading downwards.

Wilson again:

“[Consumers] going to spend that extra dollar because they’re feeling better. And now, the clock is ticking. We’re into the final part of this recovery. It could last three years, it could last five years, it could last two years, I don’t know. But that excess sort of behaviour is starting to happen.”

And that’s the worrying part.

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