by Bryan Perry

May 14, 2024

There is a growing potential that the stock market is, and could continue to be, more bifurcated going forward, where the explosive spending on AI implementation feeds the bulls within the mega-cap tech sector, while the U.S. consumer begins to dial back spending, mostly due to resurging inflation.

Some preliminary evidence comes from the latest University of Michigan consumer sentiment index, which dropped to 67.4 in May 2024, its lowest level in six months. Also, new unemployment claims in the U.S., for the week ending May 4, showed an increase of more than 10% from the previous week, with the number of workers filing for benefits surging from 209,000 to 231,000, the largest increase since last August, in what is widely considered to be a proxy for the overall labor market situation.

FRED Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

This decline in sentiment is attributed to several factors: Persistent inflation, persistently high interest rates and new fears of unemployment. Investors are well aware that consumer spending is the main driver of domestic growth, with the May reading being a shot across the bow of the bull market’s ship of prosperity.

We must also remember that these cautious consumer readings have come before, only to be proven temporary: “Perceptions don’t always match reality, and we think the fundamental backdrop remains strong enough to keep consumers spending,” said Oren Klachkin, an economist at Nationwide Financial, in a research note. “Rising incomes offer a healthy offset and will prevent consumer outlays from retrenching on a sustained basis,” he added. When upper income earners enjoy stock market and real estate market gains, bolstered by the unemployment rate holding under 4%, the bulls remain in control.

To be quite clear, the stock market usually doesn’t spend time worrying about the economic condition of the 73% of Americans living paycheck to paycheck, as few of them have little or any ownership in the stock market. The market cares mostly about the other 27% of those investing, and more importantly, about the top 10% of Americans that control 93% of total stock market holdings, and the 1% that own $44 trillion in total net worth, thanks to a record-breaking stock market (source:

As for the big picture in consumer spending by both the haves and have-nots, the nation’s biggest retailers are sensing a more cautious consumers shaping up for the second half of 2024, which in my view, is not yet factored into the Fed’s higher-for-longer interest rate policy stance, despite the recent dovish rhetoric.

Iconic consumer retail companies are raising some caution flags in some of the cheaper areas of spending – those hawking everyday items costing under $10. For instance, Starbucks lowered its expectations for its full-year sales and profits in late April, after a terrible quarter that saw a slowdown in store visits worldwide. Starbucks reported a sharper and faster decline in spending in the U.S. than it had anticipated.

Also, McDonald’s last month said that it will increase deals and value messaging to combat slowing sales. The fast-food giant said that inflation-weary customers are eating out less often in many big markets.

Here is a chart of the rather dismal progress of consumer spending over the last two years:

Economic Analysis Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

With the understanding that the stock market cares most about the high-income earners that support stock ownership, it should resonate that companies like Google laying off 12,000 people in 2023, and thousands more in 2024 to “improve velocity” (whatever that means), should take note that these six-figure-salaried layoffs begin to matter to the economy when it’s more than just Google reducing their high-paid headcount.

The list of blue-chip companies laying off well-paid employees is growing. Tesla recently announced a sweeping round of layoffs following that of a major layoff that eliminated 14,000 jobs company wide, which included the majority of the 500-person team overseeing the charging infrastructure division. Dell Technologies laid off 13,000 workers to date, almost double the number of people it previously indicated.

For 2024, job conditions in the high-paying tech space aren’t looking much better. In 2023, more than 1,190 technology companies laid off some 262,000 workers, according to, which tracks layoffs in the tech industry. The biggest layoffs in 2023 were at big-name companies among the “Magnificent 7.”

So far in 2024, over 34,000 employees have been laid off at more than 140 tech companies, according to, including big names we all recognize. With that said, it has been reported that many skilled workers were able to find new work at other companies, but this sudden change in employment tends to spark a more cautious approach to spending when it’s normal for big cap tech to announce major job cuts.

Most investors seem to accept the news of layoffs when they impact very cyclical and seasonal businesses like travel and retail, but when announcements of scores of layoffs occur in what many believe to be bullet proof business models in big-cap high-tech companies are sizeable, it causes one to sit up and take notice. This is the sector where supposedly the greatest amount of investment capital is dedicated to the broader economy. If there is a canary in the coal mine, it’s when the Teflon tech crowd gets nervous and stops buying a $7 cup of specialty coffee each morning. At least that’s something to think about.

Navellier & Associates owns Alphabet Inc. Class A &C (GOOG), in managed accounts. Some accounts own Starbucks Corporation (SBUX), McDonald’s Corporation (MCD), and Tesla (TSLA) per client request. We do not own Dell Computer (DELL). Bryan Perry does not own Alphabet Inc. Class A &C (GOOG), Starbucks Corporation (SBUX), McDonald’s Corporation (MCD), Tesla (TSLA), and Dell Computer (DELL) personally.

All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
The Big Inflation Week Starts Today

Sector Spotlight by Jason Bodner
Why I Think the Market is About to Rally

View Full Archive
Read Past Issues Here

About The Author

Bryan Perry

Bryan Perry

Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.

Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry

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