More Americans are tapping investments to fuel spending

Consumer spending has stayed resilient even as younger and lower income Americans feel squeezed by housing, debt, and everyday costs. Joining me now is Chris Wheat. He's the president of the JP Morgan Chase Institute. And Chris, thanks so much for being here. You know, a lot of people are focused on affordability and how they're paying for everything. And your report has an increasing number of households that are supporting their spending by drawing on their investments. Tell me a little bit about that. >> That's right. Um, I think a lot of people have this sense that with the stock market going up so much, it must have something to do with consumer spending, um, but a lot of people don't have a sense of exactly what households are doing, families like yours, families like mine. And that's one of the really distinctive features of our data is it lets us really see in a granular what's happening with everyday households. And so what we did was we looked at investment accounts um to see how much money was coming out of those investment accounts going into checking accounts where people can spend that money as a way to get a lens on this question. We found two really interesting things. One, the frequency in which people are pulling money out and the amount of money coming out of those accounts to fund that spending has gone up uh nearly doubled really since 2019 to 2026. Um, and then two, we found there's some really important differences in terms of like who's getting that money, who's using that money. Uh, this is a phenomenon that's most pronounced for older families, uh, and people with higher incomes. >> Well, it's interesting that you say high earners because that would seem to be the group that's most likely to have the investment gains to drive this trend. Does the data also show a generational trend here, though? >> Yeah, that's right. Um you're right to sort of note that the higher income people of course they have extra money to put into those retirement accounts and those investment accounts. Um but also older people you've had a whole career a long time to build up that money then you have more that you can take out and we see a lot more spending being funded out of those investment accounts by both of those groups older people over 65 in particular and higher income people. >> So are you thinking maybe instead of a K-shaped economy we should be talking about more of a G economy for generations? Is there a generational divide here that people should be paying attention to? >> That's a great question. Um, look, there's a lot of ways uh that the spending differences are going to come out looking different. And that's one of the reasons that we try to do the work that we do. Uh, we have this granular data. We can see what's happening with different groups of people. We can see over a long time. That was really the focus here was to show how this phenomenon has looked different as compared to a long time ago. Um but absolutely we see a lot more of this behavior for older people versus young um and that's a kind of dimension that plays out not just in spending income growth lots of things we see about household finance. >> And so younger consu consumers where do they stand for younger consumers? Are they getting some financial aid maybe from their parents' investment accounts and and using that for spending if they're able or what are they doing? >> No, it's it's a good question and I did say that this is a phenomenon that's most pronounced amongst um older people. uh people with higher incomes. Uh but the gains that we've seen, the increased amount of activity, the increased amount of money that's coming out, that's across the board. Uh so for the younger people, for the older people, higher income, lower income, every group is up since, you know, before the pandemic, before 2019. It's just that the amount of activity, uh the amount of dollars is just bigger for those groups, uh that I mentioned before. >> I don't want to forget about the people in the middle. Sometimes I think we forget about the people in the middle. So, middle income, middle-aged people, Gen X. Um, what are we seeing there in terms of what they're doing with their investing and spending >> that it it kind of looks like the overall tendency? And so I said I said before um you know when you're like looking at this in quantitative terms like every time someone's taking out uh uh spending like $100 or something like that they're they're pulling out around uh you know $6 or $7 out of an investment account like that's near the tendency that we see in the middle of the income in the middle of the the age uh range. Um and those differences I described before are you know it goes up for people that are older, it goes down for people that are younger, but the what's happening in the middle is kind of the thing that's happening overall. And if people are pulling money from investments, what's going to happen to spending if there's a downturn in the stock market? This is from stock market gains which have been phenomenal over the last several years. But what happens next? >> Uh it's a great question and again uh we've been tracking generally people's engagement with retail investment accounts, the money going in, the money going out. Uh we're seeing that that's becoming more a part of everybody's day-to-day experience of their household finances. The market's been going up. Uh that's a real opportunity to bolster some spending. Um markets go up a lot of the time. Sometimes they go down. When they go down, we've got to see if that pulls back at the same time. >> Well, interesting data to follow and a trend that we're going to be watching very closely. Chris Wheat, thank you so much for joining us. Thank you.