Zandi Sounds Alarm on Consumer Spending Optimism

Moody's Analytics Chief Economist Mark Zandi is sounding the alarm on Wall Street's optimism about consumer spending. In an Inside Economics podcast, Zandi challenged Visa Inc.'s Chief Economist Wayne Best's forecast of a 2.2% real GDP growth for 2026. Zandi argued that the macroeconomic data does not support a robust outlook for lower- and middle-income households.

Zandi pointed to flat real wage growth, a drop in the savings rate, and rising interest rates as core concerns. He noted that after-tax income adjusted for inflation is 'not going anywhere,' and consumers lack the ability to extract cash through home refinancing due to mortgage rates sitting well over 7%. 'Something doesn't compute,' Zandi stated, questioning how the economy sustains steady growth under such financial strain.

The S&P 500 index has advanced 11.84% year-to-date, but Zandi is skeptical about near-term consumer strength. He maintained that rising yields are exacerbating the situation, pointing out that credit card and auto loan rates are climbing as the Federal Reserve continues to tighten monetary policy.