“Our updated estimates suggest that households held less than $190 billion of aggregate excess savings by June,” San Francisco Fed researchers Hamza Abdelrahman and Luiz Oliveira said in a blog post published Wednesday on the bank’s website.

“There is considerable uncertainty in the outlook, but we estimate that these excess savings are likely to be depleted during the third quarter of 2023.”

Eoin Treacy's view

There are substantial events coming up in Q3 that are worth considering now. Depleted personal savings are one factor. The resumption of student loan payments for 40 million people is another. Continued upward pressure on rental costs are another. Yet, the Federal Reserve is still raising rates and does not expect to cut until well into 2024.

Regional Banks are rolling over again, having encountered resistance in the region of the lower side of the overhead trading range. The sector rebounded sharply from the March lows but the challenges that led to liquidity mismatches are still present. If consumer demand for credit or rising delinquencies appear in Q3, that is going to put more companies under stress. Fitch downgrading several institutions has helped to emphasise the emerging risks.



The underperformance of custodians is also worth mentioning. Northern Trust, BNY Mellon, Schwab are all trending lower.




Money centre banks like JPMorgan, Citigroup, Bank of America, and Wells Fargo are also trending lower.

I’ve been accused of being a broken record on the risk of being overleveraged in the unfolding situation. However, when monetary conditions are tight, rates are breaking higher, banks are underperforming and the yield curve is inverted, it is only a matter of time before that catches up with corporate earnings. At a minimum, Wall Street is unwinding its overbought condition.