Remy Blaire: US consumer sentiment falling in early October, with views of current economic conditions hitting an all-time low as inflation weighs on American households. Now, with short-term inflation expectations creeping up to near 4% and mortgage applications sliding, households are getting squeezed from all sides. Whether we’re talking about surging gas pump prices or soaring electricity bills to record housing costs, and with the Federal Reserve keeping further hikes on the table, consumers are forced to rethink their spending as well as their strategies for retirement.
Well, joining us ahead of the weekend to weigh in on what this means for household finances is Patrick Mueller, who is president of Bella Advisors. Patrick, good afternoon. Thank you so much for joining us ahead of the weekend. So given the fact that we’re looking at consumer sentiment where it is now, it isn’t surprising given higher prices and inflation expectations. So how deeply is this short-term sticker shock reshaping consumer spending as well as retirement strategies out there?
Patrick Mueller: Yeah. Great to be with you, Remy. And the gas prices have just been hitting people. They’ve been hitting the pocketbook just like they always do. So as we’ve seen, oil prices go up over 60%. That’s hitting people at the grocery stores, anything that people are consuming. You know, like we just saw with Delta not meeting their earnings this morning, and the airline prices taking a big hit today. It’s hitting people’s pocketbooks, and that forecast moving forward is not good.
So when it comes to people spending, you’re starting to see credit card debts at an all-time high. We’re seeing foreclosures, especially here in Georgia, up over 50% this year. So I think that’s the next bubble that we’re going to see. And people are grumpy right now, as we saw in the sentiment report this morning, Remy. And they don’t like it. You know, mama needs a new pair of shoes and she doesn’t want to have to wait.
Remy Blaire: Yeah. And absolutely, because we’re feeling that pressure everywhere it goes, seemingly. So how can households out there protect their discretionary cash flow against some of these uncontrollable spikes, whether we’re talking about utilities or even fuel, especially as we’re looking at diesel prices close to all-time highs?
Patrick Mueller: Great question. And we work mainly with people who are retired or close to retiring, so we pay very close attention to this. So we’ve seen the Fed raising the rates here recently. But you know, that can be good for savers, for seniors. So now that we’ve got Treasuries at an all-time high since 2002, that’s really good for people that have got money in money market accounts and CDs, and trying to get that extra interest to be able to try to keep up with inflation.
So on the flip side of that, you’ve got people who are maybe needing to get a mortgage. They need to get things financed, and they’re getting hit with these rising rates and consumer debt, credit card debt, interest rates going up. So that’s going to start hitting people.
So I think right now we’re still at all-time market highs, too. It’s a good time, always, to take some of those profits off of the table and start repositioning into things that people are getting beat up on right now when it comes to energy. So we like grid, you know, energy infrastructure moving forward. That’s a good place, I think, longer term for people to be putting money, with all the AI building and all these data centers. I think that’s going to be good longer term.
And then getting into more fixed interest rate types of investments that people can get. Like, we really like [unclear: “Asin”] a lot, because that’s giving people about a 10-plus percent yield on their money and not taking a whole lot of risk to get it. So we like positions like that right now, Remy.
Remy Blaire: Yeah. And Patrick, another area of the market that we’re keeping our eyes on is, of course, housing, as you touched upon. And mortgage applications are falling at a time when home prices remain elevated. And the recent Fed rate hike has also kept borrowing costs in the spotlight. So what advice are you giving clients who feel trapped between high home prices and elevated borrowing rates?
Patrick Mueller: They’re just going to have to hold tight, unfortunately, for a while. I would push that off if somebody was looking at getting a mortgage right now. But if rates start coming back down, as we probably expect longer term over the next two to three years, as we start seeing oil prices hopefully coming back down, if the Iran conflict comes to fruition, then I think they can always refi at some point in the future.
So I don’t know that I would necessarily have somebody that really needed to move right now getting into a new house. If they can put it off, great, but if not, it’s okay. We’re not married to that, right? We can always refinance in the future. So on that aspect, you know, we’ll have to see how things play out. But in the short run, it doesn’t feel good, right? If you’re just getting into a mortgage now, I wouldn’t be recommending that at such high rates right now. I’d be putting it off.
Remy Blaire: Yes. And just the fact that we are heading into the final months of 2026, the midterms are around the corner, and affordability remains the top factor for nearly half of consumers nationwide. But from a wealth advisory perspective, which monetary or fiscal shifts would actually move the needle for real household budgets?
Patrick Mueller: Yeah, I think that the biggest thing is you’re starting to see people tightening their pocketbooks right now with the recent rates going up. You know, financing big purchases, whether they’re doing remodeling, getting new windows on the house, things of that nature, I think you’re going to start seeing those things tapering off, especially as we start getting into the holiday season here, and people need some extra money for presents, for the kids, for the holidays. So we’ve got that starting to gear up.
And so you’ve got wages that are not going up. They went up a nickel, and you’ve got inflation going up at the pumps. I mean, you get hit hardest there, and you see it right there. And when people are going into the grocery store, it can feel like a car payment that you’re spending every time you go to the grocery store right now. So I think that’s what we can really expect.
So the big thing is making sure that you’ve got your money in places that you can count on it, like getting into fixed income types of investments, like I was talking about, where we can get a 10, 11, 12% yield as a fixed rate, so it can help keep your purchasing power and have some extra dollars to actually be able to use towards this rising inflation.
Remy Blaire: Yeah. And I think purchasing power is key, especially as we head into year-end. And of course, looking at the upcoming week, we’ll be paying attention to the official start to earnings season and, of course, key inflation figures, including CPI as well as PPI, especially ahead of the October Fed meeting. So for investors out there, what should they keep in mind in order to weather this higher-for-longer interest rate environment?
Patrick Mueller: Yeah, one of the things that I’ll be paying very close attention to, that we’re starting to see here over the last few months, is everything is so heavily weighted, and people are so heavily weighted, towards AI and tech stocks. You know, pretty much if you own the S&P, it’s all the tech companies that are typically doing pretty well right now. And these companies are going to have to back up all the money that’s being spent and all this new infrastructure and everything that’s getting put into place. You’ve got trillions of dollars going into that sector.
So you’ve got companies like IBM that you saw not meeting expectations and getting beat up. You had OpenAI that recently didn’t meet expectations. And I think you’re going to see more of that. And there’s going to be a point in time where that rug is going to get pulled out. And we’ve had the best stock market in stock market history in the last ten years, and everybody feels a little bit like a financial genius these days.
So there’s going to be a time where that’s going to have a pullback. And I would just be very cautious to people who are overweight in those sectors, like that’s always going to continue. Just make sure you don’t have too many of your eggs in one particular basket, so that when the tide goes out, just like Warren Buffett says, you see who’s swimming naked at that point. So don’t get caught naked when the tide goes out.
Remy Blaire: Well, Patrick, appreciate your time as well as all of your insights on this Friday. Thank you so much for joining us, and have a great weekend.
Patrick Mueller: You too. Thank you so much, Remy.
