Kathleen Harper works from home selling fraud-protection services, worries about gas, groceries and the economy in general, and this past week sat at Bar Roma in Chicago with her husband and ordered the $50 tasting menu instead of the usual shared appetizers. “Business has been good,” she told the Journal, “because fraud, unfortunately, is up.” That’s the American consumer in one booth: anxious, and ordering. Jeanne Whalen and Matt Grossman’s Monday front page puts numbers to it — household spending rose 6.1% in the year through August while the two big sentiment gauges sit near their lows. The mood and the money have come unglued, and the reasons why matter more for your plan than the headline does.
First, the arithmetic. Of the 6.1%, just over half is inflation — prices rose about 3.4% over the period. Strip that out and real spending still grew 2.6%, extending a five-year streak. Chicago Fed chief Austan Goolsbee calls broad consumer spending, not AI data centers, the main engine of GDP, tied to a labor market that’s cooled but hasn’t cracked. And it is broad: in the New York Fed’s survey, people earning under $50,000 reported spending up 4.7% in the year through August; those over $100,000, up 4.4%. The sofa shopper in the story, a retired lawyer of 65, said it plainly — rising prices bother her, the old couch is threadbare, and she can spend what it’s worth to her.
Where the money’s coming from
Here’s the part a planner reads twice. Spending is growing faster than disposable income. Americans now save 4.1% of after-tax income, roughly half the pre-pandemic pace, while carrying more debt than ever. Older households that own a home and a brokerage account have seen both reprice sharply higher — the S&P 500 has returned roughly 32% since May 2025 — and a bigger balance sheet loosens the wallet even when the paycheck hasn’t changed. Since that same month, the Michigan survey’s Joanne Hsu notes, sentiment has risen for the biggest stock owners and fallen for people who own none. Retail economist Mark Mathews has the line of the week: “Consumers are spending their financial condition, not their psyche.” EY-Parthenon’s Gregory Daco adds the caveat — savings, credit and wealth are all being drawn on, and all three are finite.
Our read
This is Cash Flow (M5) with a Behavioral chaser. The national story is that people feel poor and spend rich; the question for you is the opposite one — not how you feel about the economy, but whether your own spending has drifted ahead of your income without anyone deciding it should. The tell is the saving rate: if yours has slid toward the national 4.1% while your income held flat, something else is funding the difference — a card balance, a drawn-down cushion, or paper gains in a brokerage account that feel like income and aren’t. Spending from a 32% stock rally is the wealth effect, and it works in both directions. Nobody budgets for the second direction until they’re in it.
The house position doesn’t change on this story. The desk’s equity sleeves — the index funds and mega-cap names in the model books — are held at weight; nothing’s added, and the September letter’s conditions for new money haven’t been met. What we’d do is the fifteen-minute version of the Journal’s chart: pull twelve months of statements, total what came in and what went out, and see which line is bigger. If it’s the second, name the gap and decide where it’s coming from, on purpose. The consumer in the story is spending her financial condition. Make sure you know yours before the forecast turns, not after the first drop.