The Average American Savings Rate Plunged to 2.6%. Every Time It's Fallen This Low the Market Crashed.

The S&P 500 and SPDR S&P 500 ETF have risen strongly over the past year, while the U.S. personal savings rate has fallen to 2.6% in April, the lowest level since April 2008. The savings rate is measured as personal savings as a share of disposable personal income and has been tracked since the 1950s. The 30-year average is 5.7%, so the current reading is less than half the long-run norm. Historically, savings rates this low have appeared before or during periods that included the Great Recession and the 2022 market decline. Lower savings reduce household cushioning against job losses, energy shocks, and credit tightening, weakening consumer spending that supports about two-thirds of U.S. GDP and increasing stock market fragility.

"The U.S. Personal Savings Rate declined to 2.6% in April, the lowest reading since April 2008, according to Creative Planning's Charlie Bilello. However, the long memory of the data is the part that should rattle anyone watching the S&P 500. The figure comes from FRED's PSAVERT series, the Bureau of Economic Analysis's measure of personal savings as a share of disposable personal income that has been tracked since the 1950s. The 30-year average sits at 5.7%, meaning that today's reading clocks in at less than half of the long-run norm."

"OddStats put the savings-rate softness in perspective on X, noting that the only other times the savings rate was this low were the 2.5 years running up to the Great Recession, the first three quarters of the Great Recession, and the middle of 2022 (the third worst year for the markets in 50 years). That's a small and grim sample. The historical record offers a clear pattern worth noting for U.S. stock market investors."

"The mechanism is straightforward: when households save less, they carry less cushion to absorb job losses, energy shocks, or credit tightening, and consumer spending (the engine behind roughly two-thirds of U.S. GDP) becomes a thinner reed. The S&P 500 tends to wobble when that reed snaps."

"SPY holders who lived through 2008 watched the broader market lose more than half of its value, and the 2022 drawdown rattled even diversified portfolios. Yet, the pattern OddStats flagged speaks to fragility rather than fate."

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